Hong Kong court orders liquidation of evergrande

A Hong Kong court ordered China Evergrande, the world’s most heavily indebted real estate developer, to undergo liquidation following a failed effort to restructure $300 billion owed to banks and bondholders that fueled fears about China’s rising debt burden.

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But a crackdown on excess borrowing has tipped the property industry into crisis, making it a drag on the economy, as scores of other developers ran into trouble, their predicaments rippling through financial systems in and outside China.

Global financial markets were rattled earlier by fears an Evergrande liquidation could cause global shockwaves. But Chinese regulators said the risks could be contained. Only a few billion dollars of Evergrande’s debt was owed to foreign creditors.

It’s unclear how the liquidation order will affect China’s financial system.

Evergrande’s Hong Kongtraded shares plunged nearly 21% early Monday before they were suspended from trading. But Hong Kong’s benchmark

Hang Seng index was up 0.9% and some property developers saw gains in their share prices.

China’s largest real estate developer, Country Garden, initially gained nearly 3% but was flat. Sunac China Holdings rose 2.4%.

Judge Linda Chan said Monday it was appropriate for the court to order Evergrande to wind up its business given a “lack of progress on the part of the company putting forward a viable restructuring proposal” as well as Evergrande’s insolvency.