Troubled Chinese developers face unprecedented wave of liquidation suits in Hong Kong

Name: A vanishing fairyland dream: how China Evergrande rose, then crashed
Uploaded: 2024-07-01T01:00:16.000Z
Duration: 8 min 36 s
Description: A vanishing fairyland dream: how China Evergrande rose, then crashed

A worsening macroeconomic environment is prompting offshore creditors to hasten restructuring efforts, triggering a surge in lawsuits, according to industry experts

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The property sector has been at the forefront of bond defaults in China since the introduction of Beijing’s ‘three red lines’ policy in 2020. Photo: Bloomberg

Yulu Ao

Published: 9:00am, 1 Jul 2024

A growing number of frustrated creditors are filing winding-up petitions against Chinese developers, with an unprecedented four cases coming before the Hong Kong courts last week.

The surge in litigation is partly down to a strategic move by creditors to use the threat of liquidation to secure a better deal and recover more of what they are owed in a deteriorating market, according to restructuring advisors and lawyers.

The list of Chinese home builders facing liquidation lawsuits is growing longer. Kaisa Group Holdings, Shimao Group Holdings, Redsun Properties and DaFa Properties faced wind-up hearings in Hong Kong in the last week, a record for the sector.

While all of them have been granted temporary reprieves ranging from four weeks to seven weeks, some remain exposed to the risk of liquidation – Kaisa was warned there is “no excuse” for another adjournment if no progress is seen before the next hearing.

Dexin, a medium-sized developer based in eastern China’s Zhejiang province, was ordered to liquidate earlier in June by a Hong Kong court after it failed to make debt repayments in time.

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A vanishing fairyland dream: how China Evergrande rose, then crashed

Sino-Ocean, a state-backed developer, received a petition on Friday, while Country Garden Holdings, once the biggest Chinese developer, faces its next court hearing within four weeks.