China’s Evergrande Group, reputed as the world’s most heavily indebted company, has filed for bankruptcy protection in a US court.
The company initiated bankruptcy proceedings on Thursday as it attempts to restructure its debt and reach an agreement with creditors.
Why US?
The company sought protection under Chapter 15 of the US bankruptcy code, which offers protection for its US assets while it attempts the restructuring deal.
The code provides ways for dealing with insolvency cases involving more than one country.
Evergrande’s affiliate Tianji Holdings and its subsidiary Scenery Journey also filed for bankruptcy protection in a New York court.
Back from 2021
Evergrande was once China’s top property developer. Founded in 1996 in the southern province of Guangzhou by Hui Ka Yan, the company in 2021 defaulted on its debt repayment.
Its struggle with more than $300 billion in liabilities, as the Chinese government tightened scrutiny on the real estate sector, made it a symbol of the country’s property sector crisis.
Evergrande’s crisis triggered a wave of defaults, with companies responsible for 40% of Chinese home sales affected.
The situation led to thousands of unfinished homes across China.
Trading in the company’s shares have been suspended since March 2022.
Evergrande unveiled a proposal for its debt restructuring in March 2023, offering creditors a choice to swap their debt into new notes issued by the company and equities in two subsidiaries.
In July, Evergrande reported a net loss of more than $113 billion in 2021 and 2022.
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