China’s Evergrande Group has filed for Chapter 15 bankruptcy in the US, in an effort to protect its US assets and for protection in a U.S. bankruptcy court.
The once China’s top developer, and the second-largest private property firm in the country, has become the world’s most indebted property developer.
Founded by chairman Hui Ka Yan in 1996, Evergrande had over 1,300 real estate projects across 280 cities in China and had expanded its presence to industries such as film and tv, theme park construction, and property management.
But in 2021, Beijing tried to rein in soaring housing prices by cracking down on excessive borrowing by developers, which caused Evergrande to default on its debts as they were unable to make interest payments on some of its $300 billion in liabilities.
Since then, the company has been on a downward trend as it reported a net loss of over $81 billion in 2021 and 2022.
Evergrande filed for Chapter 15 bankruptcy protection in a New York court on Thursday, alongside its affiliate Tianji Holdings.
The Chapter 15 filing will help the firm to deal with insolvency cases involving more than one country but has also led to growing fears that problems in China’s property sector could spread and affect the world’s second-biggest economy.
Given that China’s real estate sector accounts for as much as 30% of the country’s GDP, the bankruptcy could send another shockwave for homeowners and the property market in China, as it did back in 2021 when the debt crisis unfolded for Evergrande.
Beijing has attempted to boost the country’s real estate sector by cutting mortgage rates, clamping down on red tape and offering more loans to developers.
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