China Evergrande: Lin Ho-man, the failed arbitration and why the developer is likely to survive its winding-up petition

A company linked to Lin Ho-man failed in an arbitration against Evergrande over a botched scheme in 2021; his winding-up petition will be heard on October 30
Lin’s vehicles paid HK$1.5 billion for a stake in an IPO involving Fangchebao; Evergrande promised investors a 1.15 times refund if the IPO failed

China property

Yulu AoandPeggy Sito

Published: 9:15am, 23 Oct 2023

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With chairman and founder Hui Ka-yan under “arrest”, the future of China Evergrande – the nation’s biggest corporate debtor – is up in the air. Can the property developer survive the next onslaught, in the form of a winding-up petition, from a Hong Kong-based creditor?

The lawsuit was filed in June 2022 by Top Shine Global Limited, whose ultimate beneficial owner is Lin Ho-man, according to Evergrande’s stock exchange filings. The petition is scheduled to be heard on October 30, having been adjourned five times while Evergrande put the finishing touches to a plan to restructure US$20 billion of defaulted debt and claims with offshore creditors.

Two companies linked to Lin are trying to recover a combined HK$1.73 billion (US$220 million) in capital and interest from a botched investment with Evergrande back in March 2021.

Here’s the story about the creditor and the reasons behind his legal actions against the debt-ridden Guangzhou-based developer.

1. Who is Lin Ho-man?

According to public records, Lin is the chairman and executive director of Hong Kong-listed fintech group HKE Holdings. The firm also provides design and building services in the medical and healthcare sectors.

Lin is 31 years old, according to records compiled by Webb-site. A native of Chaozhou in southern Guangdong province, he is also the founder of a closely-held Hong Kong fintech, stockbroking and asset management group known as Monmonkey Group, and chairman of real estate investment firm Ever Royal International.

Lin Ho-man is 31 years old, according to records compiled by Webb-site. He is the founder of a closely-held Hong Kong fintech, stockbroking and asset management group known as Monmonkey Group. Source: Weibo

He holds many positions in youth federations in Hong Kong and mainland China, local political committees, foundations and government agencies, according to HKE Holdings, and data published by Tung Wah Group of hospitals, where he is a director.

Lin did not reply to email requests seeking comments on his businesses and the dispute with Evergrande.

What is the origin of the dispute with China Evergrande?

In March 2021, China Evergrande mooted a scheme to float its fintech unit known as Fangchebao, which uses big data, artificial intelligence, cloud computing, virtual reality and other digital technologies to match buyers and sellers for online real estate and automobile transactions.

The developer collected HK$16.35 billion from 17 domestic and offshore investors, in exchange for a 10 per cent equity stake in the proposed listing candidate that will control the Fangchebao fintech business.

The investors included Citic Capital, Hong Kong billionaire Henry Cheng Kar-shun, and an offshore investment vehicle controlled by Evergrande’s then-CEO Xia Haijun. Top Shine Global invested HK$750 million. Triumph Roc International, which was identified as a unit under Lin’s Monmonkey group, also put in HK$750 million.

In an amendment to the agreement in June 2021, Hui agreed to personally refund 10 of 17 investors under a repurchase obligation. Lin’s two vehicles were excluded.

The investment agreement contained a provision requiring Hui or Evergrande to refund investors 1.15 times the sum invested upon request, in case the Fangchebao listing failed to materialise within 12 months.

What is the reason for the arbitration and winding-up petition?

Evergrande fell into financial distress and hired financial and legal advisers in September 2021 to reassess its liquidity crisis. China’s housing market slumped as the Covid-19 pandemic worsened and Beijing’s “three red lines” policy, introduced in August 2020, also pushed the weakest developers to the brink of collapse.

The listing plan for Fangchebao failed to take off. Triumph Roc International sought an emergency arbitration in August 2022, apparently having failed to retrieve its HK$750 million outlay and the 15 per cent premium, which works out to HK$862 million. The arbitration was dismissed.

Evergrande later won an order from the Hong Kong Court of First Instance in September 2023, effectively restraining Triumph Roc from pursuing the arbitral proceedings.

What are the possible outcomes of the winding-up petition?

Top Shine Global’s winding-up petition on October 30, at 9.30am local time, is expected to last about 15 minutes, according to the Hong Kong judiciary. China Evergrande may survive this court battle, if Triumph Roc’s failed arbitration is any guide.

“It is about the court not taking a favourable view towards arbitration proceedings commenced by individual creditors against a company when winding up proceedings against that company are under way,” according to lawyers at Des Voeux Chambers, which represented Triumph Roc.

“I think the company gets the benefit of the doubt,” said Jonathan Leitch, restructuring partner in Hong Kong at Hogan Lovells. “Creditors would have to show up with some force and in significant numbers to persuade the court that they shouldn’t give the company a bit more time to figure this out.

“Given the public statement from the ad hoc group (AHG) representing major offshore creditors, I don’t see them throwing their weight behind a winding up petition just yet, as they have too much on the line.”

Aside from the AHG, other unsecured creditors did not feel their views were consulted in this restructuring, Leitch added.

“I’d be surprised if they were inclined to show up and press for liquidation,” he said. “I expect the court to exercise its discretion and grant an adjournment, even if some supporting creditors emerge pushing for a winding up.”

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