Xie Yu
HONG KONG (Reuters) – Lawyers appointed as China’s liquidators Evergrande (GC:) The group is investigating some of the developer’s service providers, including its former auditor PricewaterhouseCoopers, to potentially recover losses from creditors, three sources said.
In January, a Hong Kong court ordered the liquidation of Evergrande, once China’s largest property developer, after it failed to present a concrete plan to restructure its $23 billion offshore debt, which was considered insolvent.
As part of the liquidation process, Hong Kong law firm Karas So is working with Evergrande’s two court-appointed liquidators, Tiffany Wong and Eddie Middleton of Alvarez & Marsala (A&M), three sources familiar with the matter said. .
The move, which is common in liquidation cases, signals the first steps are being taken to wind down the world’s largest property developer, with total liabilities of more than $300 billion.
A&M, Evergrande and Karas So declined to comment, and PricewaterhouseCoopers (PwC) did not immediately respond to a Reuters request for comment.
According to some offshore investors, the liquidation of Evergrande could take more than a decade and set the stage for future liquidation processes of large Chinese corporations.
In March, Reuters, citing sources, reported that lawyers working to liquidate Evergrande would look for evidence of wrongdoing and negligence on the part of the company, its management and external advisers that could lead to a default on debt.
Liquidation legal specialist Karas So is examining Evergrande’s insolvency and whether some of the embattled property developer’s service providers played a role in the rapid decline of its financial profile.
In addition to PwC, Karas So is also examining the role of other entities that provided financial and other services to Evergrande, one of the people said.
All the sources declined to be identified because they were not authorized to speak to the media.
It is unclear when Karas So and A&M will take any action once the investigation is completed.
PwC has been in the spotlight in China after the China Securities Regulatory Commission found earlier this year that Evergrande overstated revenue at its main Hengda unit by 564 billion yuan ($78 billion) in the two years to 2020.
As a result of the regulatory findings, the auditor faces a record fine of at least 1 billion yuan and the suspension of operations at some of its offices in mainland China, Bloomberg reported in late May.
The Hong Kong Audit Office is also auditing Evergrande and PwC over the developer’s financial statements starting in 2021. In April it launched another investigation into PwC after a letter alleging audit shortcomings became public.
If legal claims are brought against PwC or other service providers, Evergrande’s liquidation could set an example for other liquidators who are likely to move to recover financial losses for creditors, industry insiders say.
A Hong Kong court has ordered the liquidation of at least five Chinese property developers after the debt crisis erupted in the world’s second-largest economy in 2021, while liquidation proceedings continue against several others
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