HONG KONG (Reuters) - A Hong Kong court on Monday ordered the liquidation of Chinese real estate giant China Everland Group. This is expected to have a ripple effect on China's financial markets, and in response, government authorities are making all-out efforts to prevent a serious crisis.

Judge Chan ordered the liquidation of Evergrand, the world's most indebted developer, taking into account the fact that it had failed to present a concrete restructuring plan more than two years after defaulting on its loans. “It is time for the courts to say enough is enough.” She will announce the detailed reasons later today. Everland Chief Executive Officer Xiu Shan told Chinese media the company would still complete its housing projects despite the liquidation order. He added that the order will not affect Evergrand's domestic and international operations.

The decision is expected to draw attention from Chinese and foreign investors to the Chinese authorities' stance on treating foreign creditors in corporate bankruptcy. “This is not the end, but the beginning of a liquidation process that will make Evergrand’s day-to-day operations more difficult,” said lead researcher Gary Eng, an advisor to Natixis. “Because most of Evergrand's assets are located in China, it is unclear how creditors will liquidate the assets and where overseas creditors will be repaid, and the situation could be even worse for equity shareholders.”

The ruling sends Evergrand's stock down up to 20% before liquidation. Transactions between China Evergrand and its affiliates China Evergrand New Renewable Energy Vehicle Group and Evergrand Real Estate Services were halted following the ruling.

Evergrand has made the real estate market difficult by defaulting on its debt in 2021, and this liquidation ruling will further shock China's already fragile capital and real estate markets. China is dealing with a sluggish economy and the worst real estate market in nine years, and its stock market remains at its lowest point in five years, further compromising government efforts to revive growth if there is a new shock to investor confidence. You can.

Evergrand has applied for another stay period, with lawyers reportedly saying it has made "some progress" on its restructuring proposal. In its latest proposal, the developer proposed that creditors swap the debt for all the shares of the company's two Hong Kong units, which before the review last December held about 30% stakes in the subsidiary.

Evergrand's lawyers argued that a liquidation would harm the company's operations, real estate management and electric vehicle unit, as well as its ability to repay all of the group's creditors.

Evergrand has assets of approximately $230 billion and is facing a complex and prolonged process that is expected to take several years. Accordingly, there is a lot of room for government authorities to exercise various powers, so it is expected that there will be many political considerations.

The Tianshan application was first filed in June 2022 by Topshine, which invested in Bang Chebao, an Everland affiliate, and claimed that the company did not promise to repurchase shares purchased from the affiliate. We would like to inform you that some of the contents of this existing article have been reduced to other repetition tools for reasons that are not credited.