Chinese Real Estate Giant Evergrande Files for Bankruptcy in US

BEIJING, August 17 (TiPost)— Heavily indebted Chinese real estate giant China Evergrande Group has filed for bankruptcy in the United States.

Credit：Visual China

Evergrande has sought Chapter 15 protection from its creditors in the U.S. Bankruptcy Court for the Southern District of New York on Thursday, and its affiliate Tianji Holdings took the similar action the same day in the court. The move was made to protect assets in U.S. while debt restructuring being worked out elsewhere. Evergrande was seeking recognition of restructuring talks under way in Hong Kong, the Cayman Islands and the British Virgin Islands, and has applied to hold a Chapter 15 recognition hearing on September 20, according to a filling in the bankruptcy court in New York.

As a chapter added to the Bankruptcy Code by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Chapter 15 intends to provide for the fair and efficient administration of cross-border insolvencies that protects the interests of all creditors and other interested entities, including the debtor, and afford protection and maximization of the value of the debtor’s assets.

Evergrande’s filling may facilitate its effort for finalizing an offshore-debt restructuring plan released in April. The Chinese builder has yet won enough support from creditors. It said, in a filing with the Hong Kong Stock Exchange in April, that creditors holding more than 30% of a class of debt including margin loans and repurchase obligations have acceded to a restructuring support agreement, while the scheme of arrangement in Hong Kong requires 75% in value of creditors in each creditor class to vote for. Evergrande has obtained court approval to hold a vote on the restructuring plan later this month.

Evergrande first declared a default on its debt in late 2021 when the second largest property developer in China had a total of more than US$300 billion in liabilities. It triggered a cross-default of all outstanding U.S. dollar bonds on December 3, 2021, due to the failure to fulfill the guarantee responsibility related to a US$260 million private placement debt.

Evergrande officially confirmed its state of insolvency in the past two years at financial reports disclosed last month. The property company had about RMB1.84 trillion (US$255.6 billion) of assets as of the end of 2022, decreasing RMB270 billion, or 12.8%, from a year earlier. The asset value shrank by 20%, from about RMB2.30 trillion of assets as of the end of 2020. Evergrande’s debt load reached RMB2.44 trillion as of December 31, 2022, reducing RMB140 billion from late 2021. The insolvency gap increased from RMB 473.1 billion to RMB599.1 during the year 2022.

Of the above liabilities, Evergrande’s borrowings totalled RMB612.39 billion at the end of 2022, up 0.8% RMB5.01 billion, or 0.8%, on a year-over-year basis. Some of these borrowings were secured by the company’s land, investment properties, properties under development, self-owned completed properties, cash at banks, and equity interests in subsidiaries.

According to the report, Evergrande posted a combined net loss of RMB812.03 billion in 2021 and 2022 while the losses last year has significantly narrowed to RMB125.81 billion, compared with the net loss of RMB686.22 billion in 2021. Massive losses in operations also reduced a lot. Operating losses last year were RMB43.39 billion compared with that of RMB113.75 billion in 2021.

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