New York (TIP)- China Evergrande Group, the real estate giant whose default two years ago accelerated a broader property debt crisis in the country, sought Chapter 15 bankruptcy protection in New York on Thursday, August 17.
The move protects it from creditors in the US while it works on a restructuring deal elsewhere. The Chinese homebuilder’s Chapter 15 petition references restructuring proceedings being carried out in Hong Kong and the Cayman Islands.
International debt-restructuring deals sometimes require a Chapter 15 filing in the course of finalizing a transaction. Last year, Beijing-based developer Modern Land China Co. also filed for Chapter 15 bankruptcy after failing to repay a $250 million bond and saying it would go forward with an offshore debt restructuring deal.
Evergrande’s fate has broad implications for China’s $60 trillion financial system, and could send ripples across banks, trusts and millions of home owners, in what would be one of the nation’s largest-ever restructurings. The sheer size of its liabilities of more than $300 billion mean that the process is sure to be long.
Sentiment toward Chinese markets has been shaken this month after one of the country’s biggest property developers, Country Garden Holdings Co., lurched toward a possible first default, amid record debt failures by builders. The situation worsened in recent days when financial conglomerate Zhongzhi Enterprise Group Co. raised alarm after affiliated firms missed payments on some investment products. Source: Bloomberg