Evergrande Group, China’s second-largest real estate developer, filed for bankruptcy in New York on Thursday. The beleaguered firm borrowed heavily and defaulted on its debt in 2021, sparking a massive property crisis in China’s economy.
China’s Evergrande has filed for Chapter 15 bankruptcy protection in the US, enabling American courts to assist in cross-border insolvency cases.
This move follows Evergrande’s 2021 default, which had repercussions on China’s real estate sector and financial system. China’s real estate, once a significant growth driver, has been hit by Evergrande’s collapse and subsequent defaults by other major developers like Kasia, Fantasia, and Shimao Group.
23🇨🇳Chinese real estate giant Evergrande Group filed for Chapter 15 bankruptcy protection in the Southern District of New York, according to a court filing on Thursday.Chapter 15 serves to aid foreign companies with assets in the US to reach agreements with their creditors.
— Luis Galán Hernández (@tortura131) August 17, 2023
Beijing’s crackdown on excessive developer borrowing to curb rising housing prices exacerbated the industry’s issues, which have been further intensified by China’s broader economic slowdown.
Evergrande, an enormous conglomerate, operates over 1,300 real estate projects spanning 280 cities and engages in various non-real estate ventures like electric vehicles, healthcare, and theme parks.
The company’s financial struggles began when it defaulted on its debts in late 2021. Its debt burden escalated to 2.437 trillion yuan ($340 billion) by the end of that year, equivalent to about 2% of China’s GDP.
Evergrande also reported a staggering loss of $81 billion in shareholder funds over 2021 and 2022. Earlier in the year, the company revealed an extensive debt restructuring plan, the largest of its kind in China, and announced “binding agreements” with international bondholders regarding the plan’s crucial terms.