China’s Evergrande faces last chance to avoid liquidation

The world’s most indebted real estate developer, China Evergrand Group, is moving towards liquidation two years after it defaulted on its debt, which marked a milestone in China’s real estate crisis.

A court in Hong Kong will hold a hearing on Monday at the request of a creditor to liquidate the company, a lawsuit that has been in place for about 18 months.

The company must convince the judge that it has a concrete debt restructuring plan. If it fails, it probably means liquidation, which would lead to further chaos in its operations and further weaken sentiment in the housing market.

Evergrand has been trying to salvage its multi-billion-dollar debt restructuring plan since the process was hampered by a series of setbacks in the past few months.

In the most recent development prior to the court hearing, a group of external creditors demanded shares of controlling shares in the company and two units listed in Hong Kong, according to persons familiar with the matter.

Earlier, Evergrande proposed to offer 17.8% of its parent company and 30% of each of its affiliates, Evergrande Property Services Group and China Evergrande New Energy Group.

The tight deadline could prompt the company to introduce more favorable terms to earn bond holders, according to Xerlina Zing, senior credit analyst at CreditSights.