China Evergrande seeks Chapter 15 protection in Manhattan bankruptcy court
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CHINA Evergrande, the world’s most heavily indebted property developer and the poster child for China’s property crisis, on Thursday (Aug 17) filed for protection from creditors in a US bankruptcy court.
The company sought protection under Chapter 15 of the US bankruptcy code, which shields non-US companies that are undergoing restructurings from creditors that hope to file lawsuits or tie up assets in the United States.
China Evergrande Group said on Friday (Aug 18) that its application for bankruptcy protection is a normal procedure for offshore debt restructuring and does not involve a bankruptcy petition.
Tianji Holdings, a related company, also sought Chapter 15 protection on Thursday in Manhattan bankruptcy court.
A lawyer for Evergrande did not immediately respond to requests for comment.
Evergrande’s filing comes amid growing fears that problems in China’s property sector could spread to other parts of the country’s economy as growth slows.
Since the sector’s debt crisis unfolded in mid-2021, companies accounting for 40 per cent of Chinese home sales have defaulted.
The health of Country Garden, China’s largest privately run developer, is also worrying investors after the company missed some interest payments this month.
Evergrande recently had US$330 billion of liabilities. A late 2021 default triggered a string of defaults at other builders, resulting in thousands of unfinished homes across China.
Last month, Evergrande posted a combined US$81 billion loss for 2021 and 2022, and that had prompted investors to become anxious about the viability of a debt restructuring plan it proposed in March.
On Monday, its electric-vehicle unit China Evergrande New Energy Vehicle Group announced its own proposed restructuring to reduce debt. That plan had called for a US$2.7 billion debt-for-equity swap, and a nearly US$500 million share sale that would give Dubai’s NWTN a 27.5 per cent stake.
Trading in China Evergrande shares was suspended in March 2022. REUTERS
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