Evergrande collapses into liquidation over $498 billion debt default

After a painful two year struggle to survive, the firm has collapsed with debts numbering in the hundreds of billions of dollars.

Embattled Chinese property juggernaut Evergrande has plunged into liquidation years after it racked up debt in the hundreds of billions of dollars.

A Hong Kong court ordered the company to go into liquidation on Monday afternoon AEDT.

It comes after Evergrande was spared from the same fate in December, with the judge granting the business a two-month extension to come up with a debt plan to pay back foreign investors.

But they were unable to present a convincing enough case and now in the law’s eyes, the company has ceased to exist.

Its collapse has left the fate of 1200 projects at varying stages of completion in jeopardy.

In 2021, the property developer earned the unwelcome title of the world’s most indebted real estate firm after getting into debt to the tune of $A408 billion. This figure has since risen to $A$498 billion.

This also sparked China’s worst ever property crisis, generating fears of a contagion effect in the property sector locally and abroad.

Many were expecting the Chinese government to step in and bail out the crumbling business and its liquidation will no doubt send shockwaves through the international community.

Heavily indebted Chinese property giant Evergrande has collapsed into liquidation. Picture: AFP / China OUT

During the Monday court hearing, the judge, Justice Linda Chan, said that enough was enough.

“The hearing has lasted for one and a half years, and the company still has not been able to bring forward a concrete restructuring proposal,” she said.

“I think it is the time for the court to say enough is enough.”

Provisional liquidators have now taken over.

Shares of Evergrande on the Hong Kong Stock Exchange unsurprisingly immediately tanked off the back of the news.

The company entered into a trading halt at 10.18 a.m local time after a 20 per cent plummet.

Subsidaries of Evergrande, Evergrande Property Services and Evergrande New Energy Vehicle Group, also called for their own trrading halts to stop the freefall.

It’s one of the biggest corporate collapses in history. Picture: Bloomberg

Analysts have weighed in with what this means for the Chinese and global economy.

“Evergrande’s liquidation is a sign that China is willing to go to extreme ends to quell the property bubble,” Andrew Collier, Orient Capital Research managing director, told Reuters.

“People will be watching closely to see whether creditor rights are being respected,” Dan Anderson, a partner at law firm Freshfields Bruckhaus Deringer, told The New York Times.

“Whether they are respected will have long term implications for investment into China.”

Hui Ka Yan, chairman of China Evergrande Group, has lost most of his wealth. Photographer: Paul Yeung/Bloomberg

In 2021 and 2022 Evergrande lost a combined 581.9 billion yuan (A$118 billion).

The company reported losses of 476 billion yuan (A$97 billion) in 2021 and 106 billion yuan (A$21 billion) in 2022.

By the end of 2022, Evegrande’s debt position rose to an eye-watering 2.437 trillion yuan (A$498 billion).

At the time, CNN noted that this amount equated to about two per cent of China’s entire GDP.

In January last year, news.com.au reported that Evergrande chairman Hui Ka Yan has seen his wealth plummet by 93 per cent in the wake of the crisis.

He lost a staggering $US39 billion ($A56 billion) in just two years.

At the company’s peak, Hui was the second-richest person in Asia, according to Bloomberg Billionaires Index, which listed him as having a fortune of $US42 billion ($A60 billion). Now, there’s just $US3 billion ($A4.3 billion) left.