A Hong Kong court has issued an order that a Chinese developer’s unit that defaulted on offshore debt be wound up, the first such instance against a major builder during the country’s property-debt crisis and opening the door to more such decisions.
The order regarding Yango Justice International Ltd (陽光城嘉世國際) was dated Monday last week, according to a winding-up search report done through the Web site of Hong Kong’s Official Receiver’s Office.
The case’s first hearing date was Sept. 14 and the adjourned hearing was on Monday last week, the same day of the order. The firm is a unit of Yango Group Co (陽光城集團).
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Hong Kong has acted as a gateway for investors to access China’s high-yield credit, a market dominated by builders, but which has slid into unprecedented distress this year, reversing what was once one of the world’s most lucrative debt trades.
The tumble comes as China grapples with a real-estate crisis fueled in part by a clampdown started in 2020 on excessive borrowing by property firms and speculation by home buyers. Some builders have left projects unfinished as they struggle to pay suppliers and creditors, causing defaults to surge.
That has sparked a flurry of winding-up petitions filed in Hong Kong or Cayman Islands courts against developers, including China Evergrande Group (恒大集團) — the giant whose default on US dollar notes in late last year exacerbated the broader industry crisis.
Evergrande has said that it is pushing forward offshore debt restructuring work with its financial and legal advisers.
Creditors file winding-up petitions when they get frustrated with the lack of restructuring progress at a firm, fixed-income research analysts at BOC International Holdings Ltd (中銀國際) including Wu Qiong (吳瓊) wrote in an Oct. 13 report.
“In most cases, creditors seek more serious negotiations with the debtor by putting the debtor company under pressure or a solution through the court process,” they said.
If a Hong Kong court gives a winding-up order and appoints a provisional liquidator, the latter takes control of the firm in question and disposes of realizable assets, according to an explanation posted on the Official Receiver’s Office Web site.
Any remaining funds are distributed to creditors whose claims have been admitted.
Yango Justice defaulted for the first time in February when it missed paying US$27.3 million of interest on two US dollar bonds within a 30-day grace period, capping months of debt struggles that included seeking payment extensions.
Parent Yango Group disclosed a winding-up petition against its unit in July involving an US$8.5 million payment for offshore notes and said it “strongly” opposed the filing.
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