Evergrande creditors who opposed liquidation are now wavering

It had previously expressed opposition in the court to the lawsuit seeking liquidation. But a shock move changed the picture last month, when Evergrande scrapped creditor meetings at the last-minute and said it would reassess its restructuring proposals. The ad-hoc creditors - who hold more than $6 billion of the builder’s about $19 billion of offshore notes - responded that they were “left in the dark.”

Any liquidation of Evergrande could further rattle China’s property sector as it reels from a slump in sales, lack of homebuyer confidence and liquidity woes. The current uncertainty contrasts with last year, when the ad-hoc group’s legal representative asked for a two-month adjournment - one of several that were ultimately granted - saying it opposed the petition. At that time, the creditors thought they had a better chance of getting paid with a restructuring plan.

If they were to reverse that stance, it could raise the risk of the judge ordering a winding up. Companies that have been granted adjournments in such cases in Hong Kong have often been able to show investor support. Other developers that failed to demonstrate that have been wound up. In such cases, the court would appoint a liquidator to seize control from directors and management, and seek money for creditors from existing assets.

The Evergrande hearing will be before judge Linda Chan, an experienced judge known for handling insolvency cases. Another option before her, in addition to either another adjournment or winding up, could be to dismiss the lawsuit.

Evergrande didn’t immediately offer a comment when reached.

The lawsuit, filed by an investor called Top Shine Global Limited of Intershore Consult (Samoa), has already been lingering in the court for almost 17 months after multiple delays.