Evergrande Files for Bankruptcy Protection in NYC Court

Evergrande Files for Bankruptcy Protection in NYC Court

China's Evergrande Group Files for Chapter 15 Bankruptcy Protection in U.S. Court

China's heavily indebted property giant, Evergrande Group, has filed for Chapter 15 bankruptcy protection in a U.S. court. The company referred to ongoing restructuring proceedings in multiple jurisdictions, including Hong Kong, the Cayman Islands, and the British Virgin Islands.

Seeking Recognition for Debt Restructuring

In a separate statement, Evergrande clarified that it intends to request the U.S. court's recognition of the schemes of arrangement under offshore debt restructuring for Hong Kong and the British Virgin Islands. The company emphasized that this application is a standard procedure for offshore debt restructuring and does not involve a bankruptcy petition.

**Chapter 15 Bankruptcy Protection Explained**

Chapter 15 bankruptcy protection enables a U.S. bankruptcy court to intervene in cross-border insolvency cases involving foreign companies undergoing creditor-led restructuring. This mechanism aims to safeguard debtors' assets and facilitate the recovery of businesses facing financial difficulties.

**Affiliates Also Seek Protection**

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

**Impact on the Property Sector**

Evergrande's bankruptcy filing has raised concerns of a potential contagion effect, as the troubles in China's property sector might spill over into other areas of the economy. China's real estate sector has historically contributed significantly to the nation's GDP, making up around 30% of its total output.

**Challenges Faced by Evergrande**

In recent times, Evergrande's financial difficulties have become apparent. The company defaulted in 2021 and introduced an offshore debt restructuring plan in March. It has reported substantial combined losses of $81 billion over the past two years, attributed to unfinished projects, repayment issues with suppliers and lenders, property write-downs, and financial asset losses.

**Leaders' Policy Shift and Investor Concerns**

While there have been indications of increased support for the property sector from China's leadership, concerns among investors persist. The government's shift in stance has allowed local governments to implement specific policies to aid the property market.

**Looking Ahead**

A "scheme creditors" meeting is scheduled for Wednesday at the Hong Kong office of Sidley Austin, the U.S.-based law firm representing Evergrande, as per the bankruptcy filing signed by Jimmy Fong, listed as a "foreign representative" of China Evergrande Group.

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