The collapse of the Evergrande company, which is on the verge of bankruptcy, would endanger the Chinese construction and real estate market. By filing for bankruptcy in the United States, the company can still try debt restructuring elsewhere.
BEIJING The Chinese real estate company Evergrande has filed for Chapter 15 bankruptcy proceedings in the United States. The representatives of the Chinese company submitted the application in New York.
Chapter 15 is the last straw for many troubled international companies with operations in the United States. When Evergrande files for bankruptcy in New York, US law protects it from creditors in other countries.
This allows Evergrande to still try to organize its gigantic debts. In addition to China, they are found in different parts of the world.
Bankruptcy in the United States can therefore prevent the real estate developer from collapsing for good and at the same time driving the Chinese market into a downward spiral. The construction and real estate sector accounts for about a quarter of China’s entire economy.
The huge growth rate backfired
In recent years, Evergrande was one of the world’s largest builders and real estate developers. It owned more than 1,300 properties in 280 Chinese cities and built, among other things, the world’s largest football stadium. It was also involved in China’s growing electric car business.
Growth slipped into overdrive, and Evergrande became uncontrollably indebted. The real estate market crisis that broke out in China last year is largely considered the Evergrande crisis.
The company’s debts estimated at more than 300 billion dollars. Around USD 31.7 billion is tied up in foreign debt securities.
The world’s most indebted real estate company
The debt restructuring that Evergrande is still trying is one of the biggest ever. Evergrande is called the world’s most indebted real estate company.
China’s construction, real estate investments and housing trade have been in a slump for over a year. Constant bad news makes financial markets nervous.
Like several other banking firms, Morgan Stanley lowered its China economic forecast to 4.7 percent on Thursday. The Chinese government’s goal is five percent growth.
So far, the market has waited in vain for information on what kind of support measures the Chinese management would be willing to take to save Evergrande and other real estate developers in their country. Modern Land China and Tianji Holdings have also filed for Chapter 15 proceedings in the United States.