HONG KONG – China Evergrande Group, the world’s most indebted developer, got a final chance to get what could be the nation’s biggest-ever restructuring back on track, as a Hong Kong court adjourned a winding-up hearing.

The decision was made by Justice Linda Chan in Hong Kong’s High Court on Monday to adjourn the hearing to Dec 4, the latest in a series of delays since the proceedings began in 2022.

“This is really the last adjournment,” Judge Chan said.

Evergrande shares, which trade as a penny stock, pared earlier losses of as much as 23 per cent to 14 per cent as at 10.35am in Hong Kong on Monday.

Liquidation risks rose recently after a shock from Evergrande late in September, when it scrapped creditor meetings at the last minute and said it must reassess its proposed restructuring plan.

Any eventual winding-up would make Evergrande, with about 2.39 trillion yuan (S$456.8 billion) of liabilities, the biggest Chinese developer to ever face such a fate.

Evergrande’s reassessment of its proposed restructuring plan prompted an ad-hoc group of creditors – who hold more than US$6 billion (S$8.2 billion) of the builder’s about US$19 billion of offshore notes – to say they were “left in the dark”.

Just days before the hearing, the bloc had yet to decide whether it would speak out against the winding-up request despite having done so previously.

Evergrande’s saga injects more uncertainty into China’s property debt crisis as it heads into its fourth year amid record defaults.

The problems for the industry began in 2020 when the authorities laid out “three red lines”, which set leverage benchmarks for builders if they wanted to borrow more money. By the end of the following year, Evergrande had defaulted.

The liquidation hearing originates from a wind-up lawsuit filed by a creditor, Top Shine Global Limited of Intershore Consult (Samoa), who was a strategic investor in Evergrande’s online sales platform.

The Hong Kong court has issued at least three winding-up orders for Chinese developers since the nation’s property debt crisis began, despite thorny jurisdictional issues and China’s interest in keeping developers afloat to ensure homebuyers get the houses they have paid for.

The fate of the builder and even bigger peer Country Garden Holdings – deemed in default for the first time in recent days – is of broader significance to an economy where the property market and related industries account for about 20 per cent of gross domestic product.

As the real estate crisis came to threaten worse contagion, the authorities have recently taken steps to fine-tune policy, including a broad relaxation of down payment requirements for homes and cuts to some mortgage rates.

But that has not been enough to turn things around: Property investment contracted 9.1 per cent in the first nine months of 2023.

Any liquidation may not necessarily lead to an immediate suspension of Evergrande’s construction work, housing delivery and other activities.

After any order, the court could appoint a liquidator, who would seize control from directors and management to make major business decisions and seek gains for creditors from existing assets.

That is not an easy process in dealing with Chinese developers.

Most Evergrande projects are operated by local units, which could be hard for the offshore liquidator to seize.

Still, the bond-holder group said earlier in October that any liquidation would likely “lead to the uncontrolled collapse” of Evergrande, and a failure to obtain regulatory approval to proceed with restructuring would be “the end of the road for restructuring of Chinese companies”.

The builder has to present “concrete” restructuring progress by Dec 4 to help avoid the once-unthinkable liquidation.

Amid mounting pressure, Evergrande also held talks in recent days with some creditors who had previously opposed its plan. The winding-up lawsuit had been lingering in the court for almost 17 months after multiple delays.

Challenges for Evergrande have mounted on all fronts. Founder Hui Ka Yan has been suspected of committing crimes and placed under police control, the company said in late September. Once Asia’s second-richest man and worth US$42 billion at his peak in 2017, his net worth has tumbled to about US$970 million. BLOOMBERG