Chinese property giant Evergrande seeks bankruptcy protection in U.S. court

Paul Godfrey
·2 min read
UPI
Chinese real estate developer Evergrande filed for bankruptcy protection from its U.S. creditors in federal court in New York as it grapples with a debt mountain estimated to be as much as $300 billion. Photo by MNXANL/Wikimedia Commons

Aug. 18 (UPI) -- Chinese property giant Evergrande filed for bankruptcy protection in New York in order to buy time while it tries to restructure estimated debts of $300 billion run-up in a 15-year splurge to become one of China's leading companies.

The company petitioned a Manhattan federal bankruptcy court on Thursday under Chapter 15 of the U.S. bankruptcy code which shields non-U.S. companies from being sued or having their assets in the United States seized.

China Evergrande, among China's top 10 property developers, said it was seeking recognition of restructuring talks underway in Hong Kong, the Cayman Islands and the British Virgin Islands, according to the petition.

The filing stipulated that a "scheme of creditors" meeting was scheduled for Wednesday at the Hong Kong office of Sidley Austin, the U.S. law firm representing Evergrande.

Subsidiary Tianji Holding Limited and a sub-division, Scenery Journey, also sought Chapter 15 bankruptcy protection at the same time.

Trading in shares of Hong Kong-listed Evergrande had been suspended since March 2022 after it defaulted on debt interest payments in 2021 on $1.2 billion in international loans.

Last month, the group belatedly reported that it had lost $81.1 billion in the past two years keeping up payments to suppliers and lenders as it battled to complete more than a thousand projects in 280 cities across the country.

Evergrande blamed the losses -- $66.4 billion in 2021 and $14.7 billion in 2022 -- on a slump that forced it to take haircuts on the value of its property developments and financial assets. The heavily indebted company was also hit by higher borrowing costs.

Its problems have had a domino effect on the country's real estate sector, a vital driver of growth estimated to make up a third of the economy, leading to other developers defaulting on their debts and thousands of half-built projects scattered across China.

Since its Hong Kong IPO in 2009, Evergrande has spent billions expanding into tourism and recreation, healthcare, finance, EV manufacturing and infrastructure, entertainment, agribusiness and sport.

In 2010, the company purchased its hometown soccer club, Guangzhou FC, invested heavily in new players, and in 2020 began work on a new $1.7 billion, 100,000-seat stadium that remains incomplete after it was seized by the government in November 2021.