Evergrande seeks US bankruptcy protection

Anxiety grows over China’s worsening property crisis, its impact on economy

HONG KONG/NEW YORK:

Embattled developer China Evergrande Group has filed for US bankruptcy protection as part of one of the world’s biggest debt restructurings, as anxiety grows over China’s worsening property crisis and its impact on the weakening economy.

China unexpectedly lowered several key interest rates earlier this week in a bid to shore up struggling activity and is expected to cut prime loan rates on Monday, but analysts say moves so far have been too little, too late, with much more forceful measures needed to stem the economy’s downward spiral.

Once China’s top-selling developer, Evergrande has become the poster child of an unprecedented debt crisis in the country’s property sector, which accounts for roughly a quarter of the economy, after facing a liquidity crunch in mid-2021.

The developer has sought protection under Chapter 15 of the US bankruptcy code, which shields non-US companies that are undergoing restructurings from creditors that hope to sue them or tie up assets in the United States.

While the step is seen as procedural, it indicates that the company is nearing the end of its restructuring process after more than one and a half years of negotiations with creditors.

Evergrande said in a filing on Friday that it will ask the US court for recognition of schemes of arrangement under the offshore debt restructuring for Hong Kong and the British Virgin Islands as its dollar notes are governed by New York law.

“The application is a normal procedure for the offshore debt restructuring and does not involve (a) bankruptcy petition,” it said in the filing, adding it is pushing forward with its offshore debt restructuring.

The company proposed scheduling a Chapter 15 recognition hearing for September 20.

Evergrande’s offshore debt restructuring involves a total of $31.7 billion, which include bonds, collateral and repurchase obligations. It will meet with creditors later this month on its restructuring proposal.

Published in The Express Tribune, August 20^th, 2023.

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