The financial woes of Evergrande, once China’s largest real estate developer, are a millstone around the neck of the Chinese economy. After it became known in 2021 that the company had accumulated extremely high debts that it could not pay, the entire real estate sector fell into recession. Previously, this sector was one of the engines of local economic growth.
Filing a US Payment Holiday is another step in the effort to keep the company afloat. Specifically, Evergrande has filed for protection under Section 15 of the United States Bankruptcy Code. This allows foreign companies facing payment difficulties to protect themselves from creditors trying to seize assets in the United States. Two Evergrande affiliates made the same request.
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Martin Albers is the general correspondent for De Volkskrant.
Evergrande announced last month that it had incurred a total loss of 582 billion yuan (more than 73 billion euros) in 2021 and 2022. This brings the company’s total debt to 2,437 yuan (308 billion euros). In March, the real estate developer submitted a proposal to creditors on restructuring its foreign debt. Evergrande is currently working to get all creditors to support this plan.
Trading in Evergrande shares ceased last year. The company ran into trouble in 2021 when the Chinese government wanted to increase its grip on the real estate sector and restricted large-scale borrowing in the sector. In Evergrande’s wake, other Chinese real estate firms have defaulted on their debts. Countless construction projects have not been completed and home sales have collapsed.
Other companies are also feeling the turmoil in China’s real estate sector. A few hours after the news about Evergrande, it was announced that developer Soho China’s profits in the first six months of this year were 93 percent lower than a year earlier. Country Garden, another real estate giant, recently warned that it was considering “debt management measures.”
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