In order to protect itself from claims by creditors, Evergrande has filed for bankruptcy protection in the USA. The Chinese real estate group is considered the most indebted real estate company in the world.
The heavily indebted Chinese real estate developer China Evergrande has filed for bankruptcy protection in the United States. That emerges from documents of the bankruptcy court in Manhattan. The group wants to protect itself against claims from creditors in the United States, as reported by the Bloomberg news agency and other US media.
Under Chapter 15 of the US bankruptcy law, foreign companies can be protected from lawsuits by American creditors while they reorganize in another country. The Chinese real estate giant is in deep crisis and announced a restructuring plan in January 2022.
The most indebted real estate company of the world
According to its own balance sheet data, Evergrande has made a loss of 72 billion euros in the past two years. Overall, the debts of the former largest construction company in China amount to 2.4 trillion yuan (the equivalent of 300 billion euros) – no other real estate company in the world has a higher mountain of debt.
The one-time star of China’s housing market struggled after the property bubble burst but avoided a disorderly collapse. In March, the company had proposed debt restructuring to creditors at home and abroad.
Part of this was the offer to give them shares in the subsidiaries, such as the electric car subsidiary Evergrande NEV. China Evergrande shares have been suspended from trading in Hong Kong for more than a year amid numerous investigations.
Worries about Country Garden and spreading crisis
The Chinese real estate sector has been in a severe crisis for some time, for which Evergrande has become a symbol. The construction sector in China had been booming since the late 1990s, but many entrepreneurs were becoming increasingly indebted. In 2020, the authorities enacted measures to stop over-indebtedness. Since then, large property developers have repeatedly failed to complete projects.
The result was numerous building ruins and bankruptcies. Concerns about another large Chinese real estate developer have recently increased. Country Garden, for example, crashed after missing two coupon payments on US dollar bonds. Although it is only interest payments in the amount of 22.5 million US dollars. Nevertheless, memories of Evergrande were immediately awakened, where the problems had started in a similar way.
In addition, the real estate crisis is now also affecting other economic sectors – such as the financial sector. Zhongrong International Trust, one of the leading providers of the trust funds that are widespread in China, recently admitted to investors “short-term liquidity difficulties”, according to insiders. Many real estate developers had built on the money from the trust funds in their almost unbridled expansion in recent years.