Media reports have indicated that Evergrande’s (3333.HK) disgruntled offshore creditors stand a higher chance of recovering debts owed to them if they can show that the liquidated property developer is in turn owed monies from onshore subsidiaries.
Evergrande Offshore Creditors Have A Chance To Get Some Money Back
Reuters reported that, according to a January 2024 Hong Kong court ruling, Evergrande’s creditors are “de facto shareholders” in the company’s onshore assets. The property developer’s offshore debt is estimated at about $23bn.
Shareholders are usually last in line when it comes to liquidated debt settlements. However, in relation to the Evergrande electric vehicle (EV) and property units, the stakeholders may be regarded as more senior creditors. Deloitte’s Chinese national turnaround and restructuring leader, Glen Ho, stated:
Offshore creditors who can prove Evergrande lent money to these onshore restructured businesses have a legal right to claim back money, based on experience.
Ho substantiated this view by referring to the creditors of China Huishan Dairy Holdings receiving payments after the restructuring of this firm’s onshore subsidiaries. Based on Reuters data, Evergrande creditors must report the details of the relevant debt before meetings scheduled for 22 October 2024 and 14 November 2024.
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The liquidators representing the offshore creditors did not comment on this latest development in the Evergrande saga. This also opens the door for offshore creditors to put proof of Evergrande’s debt with other subsidiaries on the table. Ho added:
The process will be lengthy and it will be hard to navigate the mainland restructuring process.
This Hong Kong ruling is not automatically acknowledged in mainland China, and despite the recognition of offshore creditors as de facto shareholders, they still rank below the onshore ones in the payment pool.
