What will follow the liquidation of China Evergrande?

Earlier this week, a Hong Kong court decided to liquidate China's largest real estate developer, China Evergrande, which caused a strong shock in the local capital and real estate markets. 

The next stage will be the appointment of a temporary liquidator, and then an official liquidator who will take over management and prepare the company's assets for sale to repay debts.

Creditors may be offered a debt restructuring plan worth $23 billion if they conclude that the company has enough assets. Any suspicion of misconduct by the directors of this company will be immediately referred to the Hong Kong Prosecutor's Office. Perhaps Evergrande can appeal, but the liquidation process will continue until it is considered.

Trading in shares of Evergrande and its subsidiaries was suspended after the decision on liquidation was made. The company is required to provide information about its business structure with sufficient operational activity and asset value. However, the company had previously stated during a court hearing in Hong Kong that it would be able to repay only 3.4% of the debt in the event of liquidation.

In fact, this amount can be reduced to less than 3% after the company's flagship division and its head are charged with a number of crimes.

The liquidator's task, which is recognized as extremely difficult, is to sell Evergrande's stake in these two subsidiaries, although finding buyers will be an extremely difficult task.

After the liquidation of the company, the liquidator can take control of the subsidiaries of Evergrande. Many of the company's facilities have already been transferred to creditors, have been frozen by court decisions, have low value or even negative value due to lower real estate prices.

In general, due to the huge scale of the projects and the debt, Evergrande will require the intervention of many government agencies and industry representatives.