China Evergrande to be delisted from Hong Kong stock exchange following debt woes
Evergrande was the world's most heavily indebted real estate developer, with over $300 billion owed to banks and bondholders, when the court handed down a liquidation order in January 2024. The court had ruled that the company had failed to provide a viable restructuring plan for its debts, which fueled fears about China's rising debt burden, and trading of its shares has been halted since the ruling.
The Chinese territory's rules stipulate that the listing of companies may be canceled if trading in their securities has remained suspended for 18 months consecutively.
China Evergrande Group received a letter Aug. 8 from the Hong Kong stock exchange notifying the firm of its decision to cancel the listing as trading had not resumed by July 28. The last day of the listing will be Aug. 22 and Evergrande will not apply for a review of the decision, the company said in a statement.
'All shareholders, investors and potential investors of the company should note that after the last listing date, whilst the share certificates of the shares will remain valid, the shares will not be listed on, and will not be tradeable on the Stock Exchange,' the statement said.
Evergrande is among scores of developers that defaulted on debts after Chinese regulators cracked down on excessive borrowing in the property industry in 2020. Unable to obtain financing, their vast obligations to creditors and customers became unsustainable.
The crackdown also tipped the property industry into crisis, dragging down the world's second-largest economy and rattling financial systems in and outside China. Once among the nation's strongest growth engines, the industry is struggling to exit a prolonged downturn. Home prices in China have continued to fall even after the introduction of supportive measures by policymakers.
The Hong Kong court system has been dealing with liquidation petitions against some Chinese property developers, including one of the largest Chinese real estate companies, Country Garden, which is expected to have another hearing in January.
China South City Holdings, a smaller property developer, was also ordered to liquidate on Monday.
Evergrande, founded in the mid-1990s by Hui Ka Yan, also known as Xu Jiayin, had over 90% of its assets on the Chinese mainland, according to the 2024 ruling. The firm was listed in Hong Kong in 2009 as 'Evergrande Real Estate Group' and suspended its share trading on Jan. 29, 2024, at 0.16 Hong Kong dollars ($0.02).
Its liquidators said in a progress report that they received debt claims totaling $45 billion as of July 31, much higher than the some $27.5 billion of liabilities disclosed in December 2022, and that the new figure was not final.
The liquidators said they had assumed control of over 100 companies within the group and entities under their direct management control with collective assets valued at $3.5 billion as of Jan. 29, 2024. They said an estimate of the amounts that may ultimately be realized from these entities was not available yet.
About $255 million worth of assets have been sold, the liquidators said, calling the realization 'modest.' Of this amount, $244 million was derived from subsidiaries' assets, and not all of them will be available to the company, given the complex ownership structures of the assets.
'The liquidators believe that a holistic restructuring will prove out of reach, but they will, of course, explore any credible possibilities in this regard that may present themselves,' they said.
Hui, Evergrande's founder, was detained in China in September 2023 on suspicion of committing crimes, adding to the company's troubles.
In 2024, the China Securities Regulatory Commission issued a fine of 4.2 billion yuan (about $584 million) against the firm's subsidiary, Hengda Real Estate Group Company, over violations including falsifying financial records. Hui was fined 47 million yuan ($6.5 million) and barred from China's securities markets for life. Some other executives were also penalized.
Chinese authorities in September 2024 banned the accounting firm PwC for six months and fined the company more than 400 million yuan ($56.4 million) over its involvement in the audit of the collapsed property developer.
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