Winding-up order made against unit of Chinese developer Yango

Published Sun, Oct 23, 2022 · 03:57 PM

A winding-up order has been issued in Hong Kong against Chinese developer Yango Group’s unit that defaulted on offshore bonds, as debtholders of distressed builders increasingly seek court help in recovering funds amid record missed payments.

The order regarding Yango Justice International was dated Oct 17, according to a winding up search report done through the website of Hong Kong’s Official Receiver’s Office. The case’s first hearing date was Sep 14 and the adjourned hearing was Oct 17, the same day of the order.

The development makes Yango one of the first major Chinese developers to receive a winding-up order for a unit via the courts in Hong Kong, a city which has acted as a gateway for investors to access China’s high-yield credit. 

Those bonds, largely issued by builders, have slid into unprecedented distress this year, reversing what was once one of the world’s most lucrative debt trades. The tumble comes as China grapples with a real estate crisis fuelled in part by a clampdown started in 2020 on excessive borrowing by property firms and speculation by home buyers. Some builders have left projects unfinished as they struggle to pay suppliers and creditors, causing defaults to surge. 

That’s sparked a flurry of winding-up petitions filed in Hong Kong or Cayman Islands courts against developers, including China Evergrande Group – the giant whose default on US dollar notes in late 2021 exacerbated the broader industry crisis. Evergrande has said that it’s actively pushing forward offshore debt restructuring work with its financial and legal advisers.

If a Hong Kong court gives a winding-up order and appoints a provisional liquidator, the latter takes control of the firm in question and disposes of realizable assets, according to an explanation posted on the Official Receiver’s Office website. Any remaining funds are distributed to creditors whose claims have been admitted.

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When Yango Group was asked by Bloomberg News on Friday (Oct 21) whether it could confirm the winding-up order, the company wouldn’t comment on any issuance of an order, but said it is still actively negotiating and handling matters with creditors. 

The search report from Hong Kong’s Official Receiver’s Office lists “official receiver” in the line for provisional liquidator, without giving further details. 

Yango Justice defaulted for the first time in February when it missed paying US$27.3 million of interest on two US dollar bonds within a 30-day grace period, capping months of debt struggles that included seeking payment extensions. 

Parent Yango disclosed a winding-up petition against its unit in July involving an US$8.5 million payment for offshore notes and said it “strongly” opposed the filing. It’s unclear whether the order is related to that case. 

Yango Group was China’s 19th-largest builder by contracted sales in 2021 but has fallen to 36th so far this year, according to China Real Estate Information. 

The developer said in a July exchange filing that Hong Kong-incorporated Yango Justice made up less than 10 per cent of its net assets as of the end of 2021. BLOOMBERG

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