Why China Property Giant Evergrande Faces Liquidation

Property giant China Evergrande Group is heading for liquidation after a Hong Kong court ordered it to be wound up. It’s the biggest casualty of a real estate crisis that continues to drag on the world’s second-biggest economy. Evergrande defaulted on its bonds in December 2021, triggering protracted negotiations with creditors to hammer out a restructuring plan. That process stalled in September when its founder was placed under police control on suspicion of committing crimes. Evergrande bondholders are now wondering how much of their money they’ll see after the dust settles.

Evergrande, started in 1996 by Hui Ka Yan, relied on heavy borrowing to fuel its growth. It became the largest dollar-debt borrower among its peers and for a time the country’s biggest developer by contracted sales. Over the years the company also branched out into areas ranging from electric vehicles to a local sports team. It had a liquidity scare in 2020, and outlined a plan to roughly halve its $100 billion debt pile by mid-2023. But China’s housing market began to slow as regulators cracked down on excessive borrowing. Further funding problems sent the company’s stock and bonds tumbling and, after late payments on some dollar bonds, it missed a December 2021 deadline to pay two dollar-bond coupons. A “risk management committee” dominated by state officials was quickly set up to stave off a complete collapse and try to engineer a restructuring.