Evergrande has lost over $80 billion in the past two years and owes over $300 billion in liabilities
© Getty Images / Future Publishing
The world’s most indebted property developer, China Evergrande Group, has filed for bankruptcy protection in the US in an effort to restructure its mounting debt, the company announced on Friday. The group’s petition was filed in the US bankruptcy court in the Southern District of New York.
According to the court filing, the developer is seeking help under Chapter 15 of the US bankruptcy code, which protects non-US companies under restructuring from creditors planning to sue.
Evergrande also said it will ask the US court to approve its debt restructuring schemes for Hong Kong and the British Virgin Islands, as its dollar notes are governed by New York law. The company added that it was “pushing forward its offshore debt restructuring as planned.”
The company asked the court to schedule a Chapter 15 recognition hearing for September 20.
Evergrande announced its offshore debt restructuring program back in March. It adds up to roughly $31.7 billion, including bonds, collateral, and repurchase obligations. The group, which is cincorporated in the British Cayman Islands with headquarters in Shenzen, China, is now gathering support to complete the process, and is set to meet with creditors later this month.
The developer initially defaulted in late 2021 and has been struggling to complete projects and repay suppliers and lenders ever since. The company presold 720,000 apartments that it had not yet built, according to research firm Gavekal Dragonomics. As of the end of last year, the group’s overall liabilities totaled $335 billion. In its results report last month, the group also posted a combined loss of $81 billion over the past two years. The losses were the result of write-downs of properties, return of lands, losses on financial assets, and financing costs.
Evergrande’s troubles affected China’s entire real estate market, with companies accounting for 40% of the country’s home sales defaulting on their debt obligations since mid-2021, including Kaisa Group and Shimao Group Holdings. China’s largest property developer by revenue before this year, Country Garden, also reportedly faces a risk of default in the coming weeks.
“The China property sector is like a black hole, so many developers have been dragged into it since two years ago after Evergrande. The central government has yet to introduce (strong) measures because this is too large a hole to fill,” Winner Zone Asset Management CEO Alan Luk told Reuters.
For more stories on economy & finance visit RT’s business section
