Chinese real estate giant Evergrande asks court to approve debt plan that 'doesn’t involve bankruptcy filings'
The company sought Chapter 15 bankruptcy protection to protect itself from Chinese creditors.
Evergrande (Captura de pantalla Google Maps)
Chinese real estate giant Evergrande, which was once the country's second-largest real estate developer, said it has asked a U.S. court to approve a restructuring plan for foreign bondholders. The company would be seeking Chapter 15 bankruptcy protection.
It is “a normal step in the overseas restructuring procedure and doesn’t involve bankruptcy filings,” the company said in a statement obtained by the AP, in which it denied that it was bankrupt. "The company said it negotiated a restructuring with investors in its U.S. dollar-denominated bonds under the legal systems of Hong Kong and the British Virgin Islands, but you need approval from a bankruptcy court in New York City because they are governed by the laws of the state," reported the AP.
Chapter 15 bankruptcy allows the United States to recognize bankruptcy proceedings abroad, and allows foreign representatives to access domestic legal procedures, the Internal Revenue Service detailed on its Chapter 15 website.
‘The process will surely be long’
Evergrande's future has consequences for China's financial system, Bloomberg explained. It "could send ripples across banks, trusts and millions of home owners, in what would be one of the nation’s largest-ever restructurings. The sheer size of Evergrande’s liabilities of more than $300 billion mean that the process is sure to be long."
Real estate giant Evergrande first defaulted on a U.S.-dollar bond in December 2021. The incident came after several months of uncertainty over the company's finances. The situation generated concern in the Chinese real estate world. "Evergrande has been working for months to wrap up an offshore debt restructuring plan. The firm in April disclosed it didn’t yet have the level of creditor support needed to implement the plan. In July, it received court approval to hold votes on the deal. The company said earlier this week that it had rescheduled so-called scheme meetings for creditors until Aug. 28."
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