China Evergrande Must Be Liquidated, a Judge Said. What Happens Next?

After nearly two years of false starts, last-ditch proposals and pleas for more time, China Evergrande, a massive property company, has been ordered to dismantle itself. It’s a big moment. Evergrande’s collapse in 2021 sent China’s housing market into a tailspin. The worries in real estate, where most households put their savings, helped tip the economy into a downturn.

The scale of Evergrande’s empire is enormous: Its developments cover hundreds of cities. It controls dozens of business and is more than $300 billion in debt — a sum far greater than most believe its assets are worth. The company’s liquidation puts it in the same universe as Lehman Brothers, the U.S. bank that filed for bankruptcy in 2008 with $600 billion in debt.

The Evergrande bankruptcy will play out in Hong Kong and China. Courts in those two jurisdictions may determine the winners and losers among the company’s creditors. Ultimately, government officials in Beijing could get involved. The process will last years and is sure to be complicated.

A Hong Kong judge, Linda Chan, on Monday ordered Evergrande’s liquidation and appointed Alvarez & Marsal, a firm that specializes in bankruptcy cases, to manage the unwinding. The firm’s role will be to help creditors — particularly overseas investors who made loans to Evergrande — get some of their money back. Speaking to reporters outside the Hong Kong’s High Court, executives from Alvarez & Marsal said they will meet with the company to determine the next steps.

“Our priority is to see as much of the business retained, restructured or remain operational,” said Tiffany Wong, a managing director at the restructuring firm. She added that it would work with Evergrande’s executives to get creditors their money in