Evergrande Seeks US Court Approval of Colossal Debt Review

The embattled Chinese property developer Evergrande Group filed for protection from creditors in a US bankruptcy court as part of one of the world’s largest debt restructurings, as anxiety grows over the worsening housing crisis and weakening economy in china.

China unexpectedly cut several key interest rates this week in a bid to prop up struggling activity and is expected to cut prime lending rates on Monday, but analysts say the moves so far have been too little, too late, and too late. Much stronger action is needed to stop the downward spiral of the economy.

Once China’s top-selling developer, evergrande it has become the symbol of an unprecedented debt crisis in the country’s real estate sector, which accounts for about a quarter of the economy, after facing a liquidity crisis in mid-2021.

The company filed for protection under Chapter 15 of the US Bankruptcy Code, which protects non-US companies undergoing restructuring from creditors seeking to sue them or tie up assets in the United States.

Although the step is considered procedural in nature, it indicates that the company is nearing the end of its restructuring process after more than a year and a half of negotiations with creditors.

evergrande said in a filing with the regulator on Friday that it will ask the US court to recognize the settlement schemes under the overseas debt restructuring for Hong Kong and the British Virgin Islands, as their dollar bonds are governed by New York law.

“The application is a normal procedure for debt restructuring abroad and does not imply (a) bankruptcy petition. he said in the presentation, adding that he is moving forward with his foreign debt restructuring.

The company proposed to schedule a Chapter 15 recognition hearing for September 20.

The reorganization of the offshore debt of evergrande involves a total of US$31.7 billion, which includes bonds, warrants and repurchase obligations. He will meet with creditors later this month on his restructuring proposal.

A string of Chinese property developers have defaulted on their overseas debt obligations since Evergrande began its troubles, leaving homes unfinished, plunging sales and shattering investor confidence, dealing a blow to the world’s second-biggest economy. world.

The real estate crisis has also fueled the risk of financial contagion, which could have a destabilizing impact on an economy already weakened by weak domestic consumption, faltering factory activity, rising unemployment and weak foreign demand.

A major Chinese asset manager has defaulted on redemption obligations on some investment products and warned of a liquidity crunch, while Country Garden, the country’s largest private developer, has become the latest to flag a crippling liquidity crunch.

Investors in trust products at Zhongrong International Trust Co., a unit of the asset manager, have filed letters of complaint with regulators, asking authorities to intervene after the trust firm defaulted on payments.

Nomura on Friday followed some of the world’s top brokerages in lowering China’s growth forecast for this year. You now see the country’s Gross Domestic Product (GDP) growing by 4.6% this year, down from a previous forecast of 5.1%, but much of that expansion may have occurred in the first quarter after the strict restrictions were lifted. by COVID.

Source: Reuters