Real estate group Evergrande, a major Chinese developer, has sought bankruptcy protection in a New York court under Section 15 of the US Bankruptcy Act, according to court documents reviewed by Bloomberg. The filing appears to function as a strategic move to safeguard the company’s assets while negotiations proceed in other jurisdictions. In cross-border transactions, it is common for international debt restructurings to involve a Chapter 15 proceeding to streamline procedures as part of the overall deal. Evergrande’s petition explicitly references restructuring actions already pursued in Hong Kong and the Cayman Islands, underscoring the global scope of its efforts.
Evergrande has been pursuing a debt restructuring outside of mainland China for some time. The company gained court approval to seek a vote on the plan in July, with meetings scheduled for later this month to advance the process. The move reflects the firm’s attempt to coordinate creditor actions across multiple legal systems as it works toward a comprehensive restructuring package.
Offshore debt obligations exceeding 1.7 billion euros
In March of the previous year, Evergrande announced an initiative to restructure a portion of its offshore obligations, a program that later translated into approximately 140,284 million yuan, or about 17,702 million euros, based on current exchange rates. This offshore debt component has been a focal point in the broader effort to stabilize the company’s finances and restore creditor confidence.
The developer has faced significant liquidity challenges and mounting obligations, with total liabilities and expected losses drawing scrutiny from investors and markets around the world. Amid ongoing scrutiny, Evergrande has grappled with figures that place its financial stress into the hundreds of billions of yuan, highlighting the scale of the restructuring task. The company has also signaled that it expects to address a substantial portion of its obligations through internal measures and external negotiations, though the exact path remains subject to regulatory and creditor approvals.
Evergrande disclosed its 2021 and 2022 results last July as part of its relisting efforts after shares were suspended in March 2022. The annual accounts showed substantial losses for the two-year period, underscoring the severity of the financial distress facing the firm. The company reported a combined loss that reflected the heavy write-downs and impairment charges typical of a sector under stress and facing a prolonged recovery cycle. While the numbers are stark, they also illustrate the scale of the challenge in restoring profitability and liquidity as the restructuring process unfolds.
For 2021, the group posted a large deficit tied to a mix of project delays, higher financing costs, and constrained cash flow. The following year saw some improvement in certain line items, yet the bottom line remained deeply negative as the company continued to navigate a tough macro environment and the realities of its debt obligations. The accounting narrative points to a year of continued pressure, as management works to align asset values with the realities of market demand and ongoing distressed projects. The relisting effort was a strategic step to restore transparency and access to capital markets that had been closed during the suspension period.
Problems for Evergrande emerged more than two years ago, when liquidity strains intensified and the risk of default rose sharply. The broader Chinese real estate sector has faced a difficult period, with developers grappling with tighter financing conditions, a squeeze on land costs, and slower sales growth that weighed on earnings. The sector as a whole has been navigating a protracted cycle of volatility, with major players seeking to balance liquidity, debt management, and the need to complete stalled or ongoing projects. In this environment, the path to stabilization tends to involve a mix of asset restructurings, equity injections, and strategic asset sales that can help shore up balance sheets while preserving value for creditors and shareholders alike.
Industry observers note that the broader Chinese market remains unsettled. Country Garden, a leading developer controlled by Yang Huiyan, has warned of projected losses for the first half of 2023, with estimates ranging from 45,000 to 55,000 million yuan and corresponding euro equivalents. The forecast has sent ripples through the Hong Kong Stock Exchange, contributing to a decline in market confidence and heightening scrutiny of margins and solvency across the sector. The losses are attributed largely to a decline in gross margins within real estate activities and higher impairment charges tied to underperforming projects as sales slow and market conditions tighten. Currency fluctuations add another layer of complexity to the financial picture for Chinese developers with international debt commitments. The situation underscores the fragility of the sector and the ongoing need for effective balance sheet management and credible restructuring plans.