Billionaire Hui Ka Yan’s Evergrande Faces First Winding-Up Lawsuit In Restructuring Process

Billionaire Hui Ka Yan’s embattled China Evergrande Group has been hit with its first known winding-up lawsuit, as the deeply indebted company still aims to present a plan to restructure more than $300 billion in total liabilities by end of July.

The Hong Kong-listed property developer said in a Monday stock exchange filing that Samoa-incorporated Top Shine Global Limited has filed at the High Court of Hong Kong a petition to wind up the company. The lawsuit is related to a HK$862.5 million ($110 million) financial obligation, which Evergrande doesn’t specify in detail.

“The company will oppose the petition vigorously,” Evergrande writes in the filing, adding that it doesn’t expect the lawsuit to “impact the company’s restructuring plans or timetable.”

Evergrande didn’t respond to repeated requests for additional comment. The company, now declared in default and has suspended trading of its shares since March, said in June that it still aims to meet the original timetable and present a preliminary restructuring plan before end of July.

The Hong Kong Stock Exchange also set the terms for a trading resumption. It told the company to publish its financial results and conduct an independent investigation into 13.4 billion yuan ($2 billion) of cash pledged by its property services unit and now seized by relevant banks. Hui, who was formerly Asia’s richest man, still sits on almost $9 billion in wealth. Forbes estimates the amount is largely based on Evergrande dividend payouts received over the years.

The dispute with Top Shine Global, in the meantime, appears to trace its roots back to a March 2021 investment. The Samoa investment holding company was among 17 firms that had invested a combined HK$16.35 million into Evergrande’s automobile and real estate transaction platform Fangchebao, according to a stock exchange filing at the time.

Top Shine Global, whose ultimate beneficial owner is a person called Lin Ho Man, had put $95.7 million for a 0.46% stake in Fangchebao, while Triumph Roc International, another one of Lin’s investment holding companies, invested the same amount for a separate 0.46% stake. Evergrande said it needed to repurchase the shares at a 15% premium if Fangchebao failed to complete an initial public offering 12 months after the investment transaction. So far, the unit hasn’t disclosed any plan for a public offering, and is reported by state-affiliated Cailian to have shrunk some regional operations due to cash issues.

“The petition highlights that investors are disputing how the company is dealing with its debt load,” says Yan Yuejin, director of the Shanghai-based E-house China Research and Development Institution. “Evergrande shouldn’t take some investors lightly just because they didn’t have a lot of shares, because doing so might lead to more liquidation lawsuits and increase its pressure to pay off debt.”