Chinese real estate group Evergrande has filed for bankruptcy protection, or deferred payment, from a court in the United States. The company is burdened with heavy debts and hopes that this step will protect its American assets while the group works to restructure its debts.
After years of unprecedented growth, mainly financed by massive debt, China's real estate sector has been in financial distress for some time. Evergrande became global news in 2021 because the company appeared to be on the verge of collapse and threatened to send a shockwave through the financial markets. The group had hundreds of billions in debt.
New problems have recently emerged in this sector. Earlier this week, investors were shocked because Chinese real estate company Country Garden was unable to make interest payments on two bond loans on time. The distressed group still has a few weeks to meet its debt obligations to avoid being classified as a defaulter. Country Garden, like Evergrande, is very large, so if the company collapses it could have major economic consequences.
The U.S. bankruptcy proceeding Evergrande is relying on is known as Chapter 15. Evergrande's subsidiary Tianji Holdings also filed for Chapter 15 on Thursday. Last year, Beijing-based project developer Modern Land China also made the move.
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