A winding up order has been made against China Evergrande Group, the troubled property firm, through the High Court of Hong Kong.
In her ruling against the firm, Judge Linda Chan wrote, “The Company does not dispute that it is liable to pay the sum of HK$862 million (US$110 million) to the petitioner, Top Shine Global Limited, which became due on 18 April 2022. Nor does the Company dispute that it failed to comply with the statutory demand served upon it on 2 June 2022.”
Under the rules of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (CWUMPO), the Company has been deemed insolvent.
“It is indisputable that the company is grossly insolvent and is unable to pay its debts,” Chan wrote. “According to the 2023 Interim Report published by the Company on 26 September 2023, as at 30 June 2023, the company had total assets of RMB 1.7 trillion (US$237 billion) comprising non-current assets of RMB 166 billion and current assets of RMB 1.6 trillion including cash/cash equivalents of RMB 4 billion, while its total liabilities were RMB 2.48 trillion (US$333 billion). The company is balance sheet insolvent.”
Evergrande was originally incorporated on 26 June 2006 in the Cayman Islands and since 19 December 2006 has been registered as an overseas company and a registered non-Hong Kong company, with issued share capital of US$132,043,009 as of 30 September 2023, divided into 13,204,300,900 ordinary shares listed on the Main Board of The Stock Exchange of Hong Kong Limited (SEHK). Trading of the shares were suspended on 28 September 2023 and had then resumed on 3 October 2023. They have been suspended as a result of the insolvency ruling.
It has many outstanding debts, including an unsecured interest free loan of HK$2.07 billion advanced to China Ruyi Holdings Ltd through a wholly owned subsidiary of the company, Solution Key Holding Ltd, with a maturity date of 30 July 2026.
It has bank balances of HK$3 million as at 30 June 2022 and receivables of RMB 131.2 billion as of 30 June 2021 owed by the subsidiaries in the Mainland, Hong Kong, the Cayman Islands, BVI, Bermuda and Canada, of which RMB 48.4 billion were owed by subsidiaries in Hong Kong. The Company owed payables to various subsidiaries in the aggregate amount of RMB65.1 billion.
It has three main types of offshore liabilities and the liabilities as at 30 June 2022 were: CEG Notes (US$15.4 billion), SJ Notes (US$5.859) and Private Debts (US$4.099 billion).
Evergrande issued ten series of US dollar denominated senior secured notes and one series of Hong Kong dollar convertible bonds (collectively ‘CEG Notes’), all of which, except 2022 privates notes, are listed on the Singapore Stock Exchange (SGX). The payment obligations under each series of CEG Notes are guaranteed by various subsidiaries of the Company incorporated in the Cayman Islands, the BVI or Hong Kong and the shares in CEG Notes Guarantors are pledged as security for the benefit of the holders of the CEG Notes. As of 30 June 2022, the total outstanding principal of the CEG Notes was US$14.23 billion and unpaid interest was US$1.17 billion, all of which are due and payable following event of default.
Through an indirect subsidiary, Scenery Journey Ltd, incorporated in the BVI, Evergrande issued four series of USD denominated senior notes (collectively ‘SJ Notes’), with a principal value of US$5.226 billion all of which are listed on the SGX, with payment obligations guaranteed by Tianji and its 103 subsidiaries incorporated in the BVI or Hong Kong.
Evergrande subsidiary, Hengda Real Estate Group, entered into a keepwell and equity interest purchase agreement in respect of each of the SJ Notes whereby Hengda undertook to, inter alia, cause SJ and each of the SJ Notes Guarantors to remain solvent and to purchase their equity interests upon event of default. As at 30 June 2022, the total outstanding principal of the SJ Notes was US$5.23 billion and unpaid interest was US$629 million.
The Company and various entities within the Group have entered into the offshore private financing arrangements with total outstanding principal of US$4.099 billion as at 30 June 2022., including loan facilities, notes and other debts and purchase obligations to which the company is an obligor.
It has two main types of onshore liabilities: CEG Guaranteed Onshore Debts (US$8.96 billion) and Hengda Bonds (US$7.973 billion). As these CEG onshore debts were borrowed or guaranteed by the Company’s subsidiaries in the Mainland and/or are secured against the assets located in the Mainland, the judgement notes that onshore creditors have priority over the claims of the offshore creditors.
©Markets Media Europe 2023
