China Evergrande Group received a liquidation order from a Hong Kong court, setting off what’s likely to be a daunting process to carve up one of the biggest victims of a years-long and nationwide property debt crisis, reports Bloomberg. A wind-up will end up in the company being managed by provisional liquidators and addressing issues, including control by founder and Chairman Hui Ka Yan, Judge Linda Chan said in the city’s High Court on Monday morning. Trading in Evergrande shares was suspended after the stock tumbled 21%, giving it a market value of just HK$2.15 billion ($275 million).
The ruling cements the homebuilder—carrying RMB 2.39 trillion ($333 billion) of liabilities—as the most prominent symbol so far of China’s real estate crisis, which has crimped economic growth and hurt consumer confidence. The developer had failed to reach an agreement with creditors even after years of negotiations, with Hui placed under police control in September on suspicion of committing crimes.
“The liquidation order is not entirely a surprise to the market given the creditors were still not able to agree on the restructuring terms,” said Zerlina Zeng, a credit analyst at Creditsights Singapore LLC. With most assets on the mainland, “I doubt its offshore creditors would receive substantial recovery proceeds from the liquidation order,” she added.