CNN
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China’s Evergrande Group — once the country’s second-largest real estate developer — filed for bankruptcy in New York on Thursday.
The beleaguered company borrowed heavily and defaulted on its debt in 2021, sparking a massive real estate crisis in the Chinese economy, which is still feeling the effects.
Evergrande’s ft Chapter 15 bankruptcy protection, which allows the US Bankruptcy Court to intervene when a bankruptcy case concerns another country. Chapter 15 bankruptcy is intended to help enhance cooperation between US courts, debtors, and the courts of other countries involved in cross-border bankruptcy proceedings.
Evergrande did not immediately respond to CNN’s request for comment.
Evergrande shortening effect
China’s real estate sector has always been seen as A vital growth engine in the world’s second largest economy and accounts for up to 30% of the country’s GDP. But Evergrande’s default in 2021 sent shock waves through Chinese property markets, hurting homeowners and the country’s broader financial system.
The company’s default came after Beijing began cracking down on excessive borrowing by developers in an effort to rein in soaring home prices.
Since the collapse of Evergrande, several other major developers in China, including Kasia, Fantasia, and Shimao Group, have defaulted on their debts. Recently, another Chinese real estate giant, Country Garden, warned that it would “consider adopting various debt management measures” — fueling speculation that the company may be preparing to restructure its debt as it struggles to raise cash.
The industry’s problems have been amplified by the general economic slowdown in the country.
Evergrande is a massive company with more than 1,300 real estate projects in more than 280 cities, according to to his website. The company also owns several non-real estate businesses, including an electric car business, a healthcare business, and a theme park business.
Evergrande struggled to repay its loans after formally defaulting on its debt in late 2021. The real estate company’s debt load reached 2.437 trillion yuan ($340 billion) by the end of last year. This is approximately 2% of China’s GDP.
Evergrande also reported in a stock market filing last month that it lost $81 billion in shareholder money in 2021 and 2022.
Earlier this year, the company unveiled its long-awaited debt restructuring plan, which was the largest ever in China. The developer said it had reached “binding agreements” with international bondholders on key terms of the plan.
“The proposed restructuring will relieve the company’s external indebtedness pressure and facilitate the company’s efforts to resume operations and resolve issues ashore,” Evergrande said in a statement announcing the plan.
As part of the plan, Evergrande said it It will focus on returning to normal operations in the next three years, but will require between $36.4 billion and $43.7 billion in additional financing. The company also warned that its electric car unit was at risk of closing without new funding.
Since then, some financing has been obtained. Earlier this week, Dubai-based automaker NWTN, announce Strategic investment of $500 million in Evergrande EV Group for a stake of approximately 28%.
