Has the story of Evergrande really come to an end? What about the people who bought the Evergrande house?
On January 29, Evergrande was arraigned by the High Court of Hong Kong, and the judge issued a winding-up order against China Evergrande. All Evergrande stocks were suspended.
The news of Evergrande's liquidation has also been on the hot search, and many people said that Evergrande's stock market is completely over. There are also some people who are worried about what to do with the Evergrande house they bought?
If you want to know these questions, you have to figure out what does it mean to be liquidated?
Winding-up is a legal term as well as a legal procedure. It means that the company's production and operation cease, all assets will be disposed of in a short period of time, debts will be repaid in the order of creditors, and finally the company will be dissolved.
Liquidation is divided into voluntary liquidation and passive liquidation, and active liquidation mainly refers to the existence of irreconcilable interest disputes between shareholders, and in the case of the company's inability to operate normally, the active application for liquidation. The other mainly refers to the fact that the company is insolvent and is required to be liquidated by creditors and meets the liquidation criteria, that is, passive liquidation.
At first glance, it seems that Evergrande has really come to the end of its life. However, it should be noted that the liquidation of China Evergrande only refers to the listed entity of Evergrande in Hong Kong, and does not refer to the entire Evergrande Group. It doesn't even include China Evergrande's subsidiaries and grandchildren.
No one will be shocked by the news of Evergrande's liquidation, as it all seems to have been expected. As of the end of June 2023, China Evergrande's total assets are 1.74 trillion yuan, but its total liabilities are as high as 2.39 trillion yuan, which is already seriously insolvent. As early as 28 June 2022, a petition for winding-up of the company was filed with the High Court of Hong Kong. The amount involved was HK$862.5 million.
In the past year or so, China Evergrande has carried out seven postponement of liquidation, during which time Evergrande has been seeking opportunities for debt restructuring, but Evergrande's debt structure is too large and complex, and the light assets are seriously lower than the total liabilities, which also adds many obstacles to debt restructuring. In the end, the debt restructuring failed, and China Evergrande was wound up.
On the surface, the liquidation of Evergrande will have a very significant impact on the company, but in reality, the impact may not be so large, or even much smaller than we think.
Because Evergrande adopted a red-chip structure for listing that year, and domestic companies were listed overseas through backdoors, which was also the main reason for Evergrande to register a company in the Cayman Islands, this company was actually just a shell, and there was no specific actual business.
Fortunately, the High Court of the Mainland and Hong Kong have signed a "Record of Meeting on Mutual Recognition of and Assistance to Bankruptcy Proceedings by the Courts of the Mainland and of the Hong Kong Special Administrative Region", which is mainly for those companies with operations in Hong Kong and the Mainland when commencing liquidation proceedings, which can reduce the losses of creditors to a certain extent. Even so, Evergrande's creditors may lose a lot.
According to the analysis of Deloitte, a well-known accounting firm, after the liquidation of Evergrande, the rate of return for creditors was 3.4%. This is still Xu Jiayin's estimate before the investigation, and now it is only 3% at most. This means that you lent Evergrande 100 yuan at the beginning, and now you can get back the principal of 3 yuan, which is equivalent to a loss of the principal, and only get back one year's interest.
Regarding Evergrande's liquidation, Evergrande's CEO Sean said that today's court ruling is completely contrary to what we want, but we have done our best and express great regret for such a result.
At present, the court has appointed two managing directors of Ammann Corporate Advisory, Wong Wing-sze and Doo Eddie, as liquidators of China Evergrande. Wong said that the liquidation was mainly aimed at China Evergrande and would not affect the operations of the group's subsidiaries. Ammann wants to work with Evergrande's management to minimise losses to creditors.
Du Aidi said that the team still does its best to ensure that the group's business can operate normally, retain the value of Evergrande as much as possible, and give more creditors the opportunity to get repayment.
So the most important question is, what should people who buy Evergrande houses do?
Don't panic, according to mainland law, no matter what the creditor is, in front of the buyer, you have to make concessions. Ensuring the delivery of the building is the most important task of Evergrande. To put it mildly, you can not pay back other people's money, but you have to build the buyer's house before it goes out of business.
In order to support the delivery of real estate enterprises, by the end of 2023, the state has issued a special fund of 350 billion yuan to help real estate companies with difficulties in delivery to tide over the difficulties, so that buyers will not buy unfinished buildings.
According to incomplete statistics, in 2021, Evergrande will have a total of 1.5 million houses that have not been delivered. After the thunderstorm, Evergrande delivered 300,000 sets in 2022, and the delivery accelerated in the first half of 2023 to 240,000 sets, and if it was also 240,000 sets in the second half of the year, then Evergrande's delivery volume in the last two years reached 780,000 sets. According to this rhythm, Evergrande will be given another two years, and it may be possible to complete the delivery work.
According to a person familiar with the matter, Evergrande has completed 2/3 of the delivery work, and individual projects may be more difficult, but Evergrande is expected to finally solve the work of ensuring the delivery of the building with the attention and support of many parties.
After the completion of the delivery work, if Evergrande still has assets, it will be repaid in accordance with the priority of the debt. The most pitiful thing is the shareholders of Evergrande, who have lost nothing, but they are helpless!
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