KEY TAKEAWAYS
- One of the biggest property developers in China, Evergrande Group, filed for Chapter 15 bankruptcy protection in New York as it carries out its complex debt restructuring process.
- The filing sparked concerns for China’s real estate market and growth prospects, as the property sector accounts for about 30% of its economy.
- There are fears of the property crisis spreading to other parts of the world’s second-largest economy, which is struggling to revive post-pandemic
One of the biggest players in the Chinese real estate market, property developer Evergrande Group filed for U.S. Chapter 15 bankruptcy protection on Thursday, fueling fears of a deepening property crisis in China
With over $300 billion in liabilities, the Evergrade Group is the world’s most indebted property developer. Evergrande’s $31.7 billion offshore debt restructuring of bonds, collateral, and repurchase obligations, was announced in March.1
The company said the filing in a Manhattan court is procedural, but it shields the company from creditors that hope to sue them or tie up assets in the United States while it is undergoing restructuring in Hong Kong, the Cayman Islands, and the British Virgin Islands
Evergrande’s liabilities indicate China’s unprecedented debt crisis in the once engine-of-growth property sector, which accounts for about 30% of the country’s economy.2
Accustomed to consuming debt for growth to fuel huge demand for apartments, developers first experienced a change in 2020 when the authorities laid out leverage rules that builders had to meet to borrow money.34 The junk dollar bonds frequently issued by developers came under pressure, falling to an average of about 65 cents, according to a Bloomberg index.
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Source: www.investopedia.com
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