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China Economy


CHINA’S PROPERTY GIANT EVERGRANDE FILES FOR BANKRUPTCY PROTECTION IN MANHATTAN
COURT

Published Thu, Aug 17 202311:12 PM EDTUpdated Fri, Aug 18 20238:00 AM EDT
Sumathi Bala
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Key Points
 * China’s heavily indebted property developer Evergrande Group on Thursday
   filed for Chapter 15 bankruptcy protection in a U.S. bankruptcy court.
 * In a filing to the Manhattan bankruptcy court, the firm sought recognition of
   restructuring talks underway in Hong Kong, the Cayman Islands and the British
   Virgin Islands.
 * The world’s most indebted property developer defaulted in 2021 and announced
   an offshore debt restructuring program in March.

A residential complex constructed by Evergrande in Huai’an, Jiangsu, China, on
July 20, 2023.
Future Publishing | Future Publishing | Getty Images

China’s heavily indebted property giant Evergrande Group on Thursday filed for
Chapter 15 bankruptcy protection in a U.S. court.

In a filing with the Manhattan bankruptcy court, the company referenced
restructuring proceedings in Hong Kong, the Cayman Islands and the British
Virgin Islands.



In a separate statement, Evergrande on Friday said that it will ask the U.S.
court for “recognition of the schemes of arrangement under the offshore debt
restructuring for Hong Kong and the British Virgin Islands.”

It added, “The application is a normal procedure for the offshore debt
restructuring and does not involve bankruptcy petition.”

The world’s most indebted property developer defaulted in 2021 and announced an
offshore debt restructuring program in March. Trading of Evergrande shares have
been suspended since March 2022.



Chapter 15 bankruptcy protection allows a U.S. bankruptcy court to intervene in
cross-border insolvency case involving foreign companies that are undergoing
restructuring from creditors. It aims to protect the debtors’ assets and
facilitate the rescue of businesses that are in financial trouble.

Tianji Holdings, an affiliate of Evergrande, and its subsidiary, Scenery
Journey, also filed for Chapter 15 protection in Manhattan bankruptcy court,
according to the filing.




PROPERTY SECTOR FALLOUT

Evergrande’s filing comes amid contagion fears that China’s property sector
troubles could spill over to other parts of the economy, which has already seen
faltering growth.

Most recently, Country Garden, which used to be one of China’s largest
developers, struggled to make coupon payments on U.S. dollar-denominated bonds
and issued a profit warning.

The firm has also suspended trading in at least 10 of its mainland China-traded
yuan bonds, according to Reuters.

watch now
VIDEO8:5408:54
Chinese property giant Evergrande has a big debt problem – here’s why it matters
CNBC Explains


China’s massive real estate sector has long been a vital engine of growth for
the world’s second-largest economy, and accounts for as much as 30% of the
country’s gross domestic product.

Despite recent policy signals, investor worries linger. In late July, its top
leaders indicated a shift toward greater support for the property sector, paving
the way for local governments to implement specific policies.

In July, Evergrande posted a combined loss of $81 billion over the past two
years, after struggling to finish projects and repay suppliers and lenders.

Net losses for 2021 and 2022 were 476 billion yuan ($66.36 billion) and 105.9
billion yuan ($14.76 billion), respectively, as a result of property
write-downs, return of lands, losses on financial assets and financing costs,
the company said.

The bankruptcy filing was signed by Jimmy Fong, who listed himself as a “foreign
representative” of China Evergrande Group. A “scheme creditors” meeting is set
for Wednesday at the Hong Kong office of Sidley Austin, the U.S.-based law firm
representing Evergrande, the petition added.

— CNBC’s Evelyn Cheng and Elliot Smith contributed to this story.


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