A key offshore subsidiary of China Evergrande Group, CEG Holdings BVI Ltd., has been ordered to wind up in Hong Kong. This decision marks a significant victory for liquidators attempting to recover assets from the heavily indebted property developer. The ruling underscores the ongoing challenges in China’s real estate sector and the complexities of navigating cross-border insolvency proceedings.
A Hong Kong court issued the winding-up order on Friday following a brief hearing. This legal action follows a similar order issued against the parent company, Evergrande Group, a year earlier. The collapse of Evergrande, once a giant in China’s property market, triggered a widespread crisis in the sector, leading to record defaults by other developers.
Evergrande’s court-appointed liquidators have been working to untangle the company’s complex corporate structure and recover funds for creditors. Their efforts have been hampered by jurisdictional challenges, as many of Evergrande’s assets are located in mainland China. The successful winding-up petition against CEG Holdings BVI Ltd. represents a strategic win, allowing liquidators to target assets held within the offshore entity.
CEG Holdings BVI Ltd. holds a substantial stake, nearly half, in Evergrande Property Services Group, the developer’s property management arm. This stake is currently valued at approximately HK$7.4 billion ($945 million). Evergrande Property Services Group was a central component of the unsuccessful restructuring negotiations between Evergrande and its creditors. Gaining control of this asset could provide a significant recovery for creditors.
Beyond the CEG Holdings BVI Ltd. winding-up order, liquidators are pursuing other avenues for asset recovery. These include efforts to reclaim $6 billion in dividends and compensation paid to seven individuals, including Evergrande founder Hui Ka Yan. Legal proceedings have also been initiated against the company’s former auditors and real estate service providers concerning valuation reports produced for Evergrande and its subsidiaries.
This recent ruling against Evergrande’s offshore unit serves as a stark reminder of the ongoing financial pressures faced by Chinese developers. The news sent shockwaves through the market, with shares of Sunac China Holdings Ltd., another major developer facing its own winding-up petition in Hong Kong, plummeting by as much as 30% on Friday. The case highlights the continuing fragility of the Chinese property market and the potential for further distress in the sector.
The case number for the CEG Holdings BVI Ltd. winding-up petition is HCCW 528/2024. This legal action will continue to be closely monitored by investors and stakeholders in the Chinese real estate market.
