Evergrande’s Exit: The World’s Most Indebted Company Leaves Hong Kong Markets
Haunted by Debt: The Fall of China’s Property Titan
In a move that underscores the widening crisis in China’s real estate market, the once‑dominant property developer will be removed from the Hong Kong Stock Exchange later this month. The decision marks a significant escalation for a sector already weighed down by staggering debt.
Key Facts About the Delisting
- Company Profile: Formerly the largest developer in the country, the firm once dominated the skyline with sprawling residential complexes.
- Debt Burden: Lept to an outstanding debt of approximately ¥900 billion, a figure that dwarfs its annual revenue.
- Market Impact: Trading on the Hong Kong ACE platform ceased; investors are left uncertain about the company’s future.
What This Means for the Sector
- Investor Confidence Declines: The delisting signals a lack of confidence from both local and international shareholders.
- Credit Crunch: The debt-laden nature of the firm adds pressure on banks, which are tightening lending standards.
- Regional Ripple Effects: Smaller developers are increasingly pressured to seek alternative financing, firing off a chain reaction within the market.
Looking Ahead
With the removal from the exchange, the company will need to navigate a complex path—potential rescue plans, asset sales, or a fresh capital infusion. The headline is clear: as China’s real estate crisis pivots from crisis to crisis, only a few survive.
Evergrande Schedules Delisting from Hong Kong Exchange
Evergrande, which evolved from China’s second‑largest property developer to the world’s most heavily indebted corporation, has announced that it will be removed from the Hong Kong Stock Exchange on 25 August.
Background
Established in 1996, the company grew by aggressively borrowing to acquire land and build large‑scale projects, fueling a rapid expansion that was largely debt‑driven.
Diversified Operations
- Wealth management services
- Electric vehicle production
- Theme park development
- Bottled water manufacturing
- Ownership of a professional soccer club
Delisting in Hong Kong
Evergrande’s Delisting Following Judicial Liquidation
On 8 August, the Hong Kong Stock Exchange formally notified China Evergrande Group of its decision to cancel the company’s listing because trading had not resumed within the required 18‑month window. The delisting will take effect on 22 August, and Evergrande has declined to seek a review.
Background: The Liquidation Order
- In January 2024, a court issued a liquidation order after refusing to accept Evergrande’s proposed restructuring plan.
- At the time of the ruling, the developer was obligated to over $300 billion (≈ €257.1 bn) to banks and bondholders.
- Share trading was halted following the court’s decision, prompting wide concern over China’s mounting debt exposure.
Listing Rules and the Decision to Cancel
- The Hong Kong Stock Exchange stipulates that a company may be removed if its securities remain suspended for 18 consecutive months.
- Evidently, Evergrande’s trading had been suspended until 28 July, falling short of the recovery threshold.
- Consequently, the exchange issued a cancellation notice on 8 August.
Implications for Investors
According to the company’s statement, the following apply after the final listing date:
- Share certificates will stay valid.
- Shares will no longer be listed on or tradable through the Stock Exchange.</
Shareholders, investors, and prospective buyers are advised to consider the impact of this delisting on their holdings.
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A trouble-ridden sector
Evergrande’s Storm of Debt and the Broader Property Crisis
In 2020, Chinese regulators intensified a crackdown on the real‑estate sector’s excessive borrowing. The move sent shockwaves through developers, Evergrande among them, compelling them to default on their debts. With financing no longer attainable, the company’s extensive obligations toward creditors and tenants became unsustainable.
Impact on China’s Economy and Global Financial Systems
The crackdown plunged the property market into turmoil, pulling down the world’s second‑largest economy and unsettling both domestic and international financial networks. The industry, once a primary driver of growth, now struggles to emerge from an extended downturn. House prices have continued to decline despite policy interventions.
Liquidation Proceedings in Hong Kong
- The Hong Kong court has processed liquidation petitions against several Chinese developers, notably Country Garden, the country’s largest real‑estate player, with a forthcoming hearing scheduled for January.
- On Monday, China South City Holdings, a smaller developer, received a liquidation order.
- Evergrande, founded in the 1990s by Hui Ka Yan (also known as Xu Jiayin), owns over 90% of its assets on the mainland, according to the 2024 ruling.
Company Overview
Evergrande, listed in Hong Kong in 2009 as “Evergrande Real Estate Group,” halted its share trading on 29 January 2024 at an unprecedented 0.16 HKD (€0.017). The liquidators assumed control of more than 100 group companies, with total assets valued at $3.5 billion (€2.99 bn) by that date. However, an accurate estimate of eventual recoveries remains unavailable.
Assets worth approximately $255 million (€218.5 m) have been sold, with the liquidators describing the proceeds as “modest.” They add that a comprehensive restructuring is unlikely, yet they will explore any viable options that arise.
Compounding the company’s woes, founder Hui Ka Yan was detained in China in September 2023 on charges of criminal activity.
