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Analysis | Why Evergrande’s Hong Kong liquidation order is just the start of an uphill battle for its offshore creditors
- The court has sent a strong message to financially stressed companies about the importance of developing a concrete restructuring plan, lawyer says
- Chinese courts have the discretion to refuse Evergrande liquidators’ requests
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China Evergrande Group’s overseas creditors are likely to remain on tenterhooks, as the crucial question that follows its liquidation order in Hong Kong is whether the liquidators will be able to secure recognition and help from mainland Chinese courts to effectively seize assets within the mainland.
A pilot measure for mutual recognition and help in insolvency proceedings between the courts on the mainland and Hong Kong agreed in mid-2021 could face a real test, according to legal experts.
The Hong Kong High Court approved a petition by creditors to liquidate Evergrande on Monday morning and two managing directors of Alvarez & Marsal, the global restructuring and consultancy firm, were appointed as the developer’s liquidators.
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The order has been granted as the company still has not been able to bring forward a “concrete restructuring proposal” to restructure its US$328 billion in liabilities, according to Justice Linda Chan’s ruling on Monday.
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“The court has sent a strong message to financially stressed companies about the importance of developing a concrete restructuring plan,” said Jonathan Leitch, a restructuring lawyer and partner in Hong Kong at Hogan Lovells.
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