In a significant development, China’s leading property developer, Evergrande Group, has taken a significant step towards its financial restructuring by filing for Chapter 15 bankruptcy protection in a United States bankruptcy court. This strategic move comes as the company actively engages in ongoing restructuring discussions across Hong Kong, the Cayman Islands, and the British Virgin Islands.
In a submission made to the esteemed Manhattan bankruptcy court, Evergrande Groupl has formally requested acknowledgment of the ongoing restructuring processes currently underway in multiple international jurisdictions. This multi-pronged approach reflects the company’s comprehensive efforts to address its financial obligations and navigate its complex financial landscape.
Evergrande Group, recognized as one of the world’s most heavily indebted property giants, previously encountered a default situation in 2021, subsequently announcing a comprehensive offshore debt restructuring initiative in March. This filing for Chapter 15 bankruptcy protection in the U.S. represents a significant step forward in the company’s pursuit of stability and recovery.
The company’s management emphasized that the court application seeks recognition of the schemes of arrangement pertaining to the offshore debt restructuring in both Hong Kong and the British Virgin Islands. Importantly, this measure is positioned as a standard procedural step within the context of offshore debt restructuring and is distinct from a formal bankruptcy petition.
Undoubtedly, the financial challenges faced by Evergrande Group have been profound. The company has faced setbacks such as the suspension of Evergrande shares’ trading since March 2022. These difficulties culminated in a substantial loss of $81 billion over the last two years, attributed to complexities in project completion, supplier and lender repayments, and broader financial obligations.
Furthermore, the company’s financial reports for the years 2021 and 2022 demonstrate net losses of 476 billion yuan ($66.36 billion) and 105.9 billion yuan ($14.76 billion) respectively. These losses are primarily attributed to a series of factors including property devaluations, land returns, financial asset losses, and financing expenses.
The formal bankruptcy filing has been authorized by Jimmy Fong, who has designated himself as the “foreign representative” of China Evergrande Group. Looking ahead, a pivotal “scheme creditors” meeting is scheduled to convene at the Hong Kong offices of Sidley Austin, a distinguished U.S.-based law firm that is representing Evergrande in this intricate process.
As Evergrande Group navigates this crucial phase of its financial journey, its efforts to restructure and regain stability remain closely watched by global financial experts. The company’s strategic approach underscores its commitment to addressing its obligations, restoring investor confidence, and potentially reshaping the broader landscape of the property development industry.
(Contributions to this article were made by CNBC’s Evelyn Cheng and Elliot Smith.)
