Explainer-What happens next after China Evergrande ordered to liquidate?
By Clare Jim and Scott Murdoch
HONG KONG (Reuters) — A Hong Kong court on Monday ordered China Evergrande (HK:3333), the world's most indebted developer, to be liquidated.
The move could send shockwaves through already fragile Chinese capital and property markets. Such a process could be complicated, with potential political considerations, given the many authorities involved.
WHAT HAPPENS AFTER THE COURT ORDERS EVERGRANDE LIQUIDATED?
Once a liquidation order is issued, a provisional liquidatorand then an official liquidator will be appointed to takecontrol and prepare to sell the developer's assets to repay itsdebts.
The liquidators could propose a new debt restructuring planto offshore creditors holding $23 billion of debt in Evergrandeif they determine the company had enough assets or if a whiteknight investor appeared. They would also investigate thecompany's affairs and could refer any suspected misconduct bydirectors to Hong Kong prosecutors.
Evergrande could appeal a liquidation order, but theliquidation process would proceed pending appeal.
Shares in Evergrande and its listed subsidiaries were suspended from trading after the liquidation order. Listing rules require a company to demonstrate a business structure with sufficient operations and asset values.
HOW MUCH DEBT MIGHT CREDITORS RECOVER AND WHAT ARE THE MAINCHALLENGES?
Evergrande cited a Deloitte analysis during a Hong Kongcourt hearing in July that estimated a recovery rate of 3.4% ifthe developer were liquidated.
However, after Evergrande said in September its flagshipunit and its chairman Hui Ka Yan were being investigated by theauthorities for unspecified crimes, creditors nowexpect a recovery rate of less than 3%.
Evergrande's dollar bonds were bid
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