(Bloomberg) — China’s Evergrande Group filed for Chapter 15 bankruptcy protection in New York on Thursday, in a move that shields its US assets from creditors while it works on a restructuring deal elsewhere.
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The China Homebuilder’s Chapter 15 petition cites restructuring actions being carried out in Hong Kong and the Cayman Islands. Its Viewer’s Journey unit has also filed for Chapter 15 protection, along with subsidiary Tianji Holdings.
International debt restructuring deals sometimes require a Chapter 15 filing in the course of completing the transaction. Last year, Beijing-based developer Modern Land China filed for Chapter 15 bankruptcy after filing for $250 million bond repayments saying it would move forward with an offshore debt restructuring deal.
Evergrande has been working for months to finalize its foreign debt restructuring plan. Evergrande revealed in April that it did not have the level of creditor support required to implement the plan. In July, it received court approval to hold a vote on the deal. The meetings are scheduled for later this month.
Read more: Evergrande’s creditors have seized a $1.6 billion tower they can’t sell
Evergrande defaulted on a dollar bond for the first time in December 2021 after months of uncertainty about its finances. The company’s struggles helped trigger the initial wave of concerns about China’s real estate sector that have continued to grow.
Evergrande’s bankruptcy attorney did not immediately respond to a request for comment.
The case is China Evergrande Group and Jimmy Fong, 23-11332, US Bankruptcy Court for the Southern District of New York (Manhattan).
— With assistance from Jonathan Randles and Stephen Church.
(Adds extra context throughout.)
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China Evergrande Group, one of China’s largest real estate developers, has filed for Chapter 15 bankruptcy protection in New York. This move allows the company to shield its US assets from creditors while it continues to work on restructuring deals in other locations. The Chapter 15 petition specifically mentions restructuring actions taking place in Hong Kong and the Cayman Islands, as well as the filing of Chapter 15 protection by its Viewer’s Journey unit and subsidiary Tianji Holdings.
International debt restructuring deals often involve a Chapter 15 filing to facilitate the completion of the transaction. This was the case last year when Modern Land China, another Chinese developer, filed for Chapter 15 bankruptcy after struggling with bond repayments. Similarly, Evergrande has been working for months to finalize its foreign debt restructuring plan, but has faced challenges with garnering enough creditor support to implement the plan.
The company defaulted on a dollar bond in December 2021, marking its first default and sparking concerns about its financial stability. This default, along with ongoing struggles in the Chinese real estate sector, has raised questions about the future of Evergrande and its impact on the broader economy.
Despite these challenges, Evergrande has been moving forward with its restructuring efforts. In July, the company received court approval to hold a vote on the restructuring deal, with meetings scheduled for later this month. The outcome of these meetings will be crucial in determining the company’s future and its ability to navigate its debt obligations.
The bankruptcy filing in New York is just the latest development in Evergrande’s ongoing saga. As the company continues to work towards a restructuring deal, all eyes will be on the outcome of the upcoming creditor meetings and the potential implications for the Chinese real estate sector. It remains to be seen how Evergrande will navigate these challenges and what the future holds for one of China’s most prominent developers.
