(Yicai Global) June 27 -- An overseas creditor has filed a petition with Hong Kong’s high court to wind up China Evergrande Group, the world’s most indebted developer. But the move is unlikely to force the builder’s liquidation, as it is mainly intended to put pressure on the firm, according to an economist.

Top Shine Global Limited of Intershore Consult Samoa filed the petition, according to a recent announcement on the website of the Hong Kong judiciary, with a preliminary hearing scheduled for Aug. 31.

Creditors and/or company officers can file a winding-up petition if a firm has excess liabilities. If the plea is granted, the court will issue a compulsory winding-up order forcing the business to sell assets to repay debt and distribute the remaining property.

Firms that default on overseas debt have often triggered conditions for liquidation, so that there is a high probability of offshore courts or arbitrators ruling in favor of winding up, Bai Wenxi, chief economist at Interpublic Group China, told Yicai Global.

But Bai also pointed out that since the assets and businesses of mainland developers are largely in China, offshore winding-up rulings may not be upheld by mainland courts. So a petition for liquidation is generally aimed at just putting pressure on the defaulter to make compromises beneficial to the creditor.

Still, Bai noted that if the court passes the winding-up petition, though it may not be enforceable, it will harm the reputation, brand and capital market activities of the business concerned. He believes that apart from affecting a real estate firm’s image and standing, a winding-up application hardly seems to force them to compromise.

Before Evergrande, Chinese developers Dafa Land and Fantasia Holdings have also faced winding-up petitions made by overseas creditors this year.

Since Evergrande’s cash crunch began in the second half of last year, its sales have slumped. From September to this March, its average monthly sales were almost stagnant at CNY20 million to CNY30 million (USD3 million to USD4.5 million). April’s sales tallied just CNY3.09 billion (CNY462 million).

Meanwhile, because Evergrande said that it would never sell its land resources cheaply, the group’s asset disposals also have been quite slow. The company has only announced four divestments with a total of less than CNY3 billion. It expects to announce a preliminary restructuring scheme by the end of July.

Editors: Tang Shihua, Peter Thomas