On July 29th (Monday), the Hong Kong court postponed the hearing on the winding up of Country Garden until January 20th, 2025, giving this real estate developer that is undergoing offshore debt restructuring a six-month breather.
According to Reuters, in February this year, Ever Credit Limited, a subsidiary of a Hong Kong-listed company, Jian Tao Group Limited, filed a winding-up lawsuit against Country Garden involving approximately HK$1.6 billion (about USD 2.05 billion) in unpaid term loans and accrued interest.
Last year, Country Garden defaulted on offshore bonds worth US$11 billion.
During Monday’s hearing, Country Garden’s lawyer Jose-Antonio Maurellet informed the court that the company expects to disclose its offshore debt restructuring plan to creditors in September and seek court approval for the plan early next year.
Maurellet stated that Country Garden’s offshore debt restructuring is a complex and large-scale task with the company and creditor advisors holding meetings weekly and bi-weekly, with the restructuring making “substantial progress.”
A group of bank lenders and bondholders have expressed support for Country Garden’s application to postpone the hearing to allow the company time to carry out the debt restructuring.
Reportedly, if Country Garden can propose and obtain approval for an offshore debt restructuring plan, it could overturn the winding-up lawsuit.
Due to its failure to release its 2023 financial report by the March 31 deadline, trading of Country Garden’s stocks in Hong Kong has been suspended since April 2, awaiting the report’s publication.
Maurellet also told the court that Country Garden currently has over 40,000 full-time employees and 3,134 ongoing projects, with 3,103 of them located in mainland China.
In recent years, an increasing number of Chinese real estate developers have defaulted on overseas debts, with many facing winding-up lawsuits filed by creditors. So far, industry giants, including Evergrande Group, have been ordered to wind up.
For investors, recovering assets in Chinese real estate winding-up cases proves to be extremely challenging. Analysts suggest that overseas investors holding developer bonds in China face a dilemma distinct from onshore investors. They must take legal action against developers to pressure them to repay debts, but they often receive little return if the company is wound up, relying on liquidators selling offshore assets to recoup a small portion of their investment.
Insiders indicate that many developers have “virtually no overseas assets to sell,” and there are cross-border issues related to China’s policy on property guarantees. Additionally, the real estate market is on a downturn, making the enforceability of winding-up orders highly challenging.
Although mainland China and Hong Kong did establish cross-border bankruptcy cooperation arrangements in 2021, to date, fewer than five cases have been recognized.
Industry experts suggest that Country Garden’s winding-up would further deteriorate the prospects of the Chinese real estate industry. Despite a series of stimulus policies introduced by the Chinese government since 2022, no concrete results have been observed.