On Friday afternoon, Evergrande clarified that it is pressing ahead with offshore debt restructuring and had not filed a bankruptcy petition, which is a formal declaration that a company cannot pay its debts. The Chapter 15 filing is a “normal” part of offshore restructuring, it said in a filing to the Hong Kong stock exchange.
Bankruptcy protection allows a company to continue to operate while it restructures by limiting court cases and debt collections against it.
Founded by Xu Jiayin in 1996, Evergrande soared to success amid a Chinese housing boom, using a “borrow-to-build” model that involved racking up massive amounts of debt. It at one point employed 200,000 people and had more than 1,300 projects in more than 280 cities, according to its website.
In recent years, Evergrande has become an emblem of China’s real estate crisis.
In 2021, under the weight of $300 billion in liabilities, Evergrande defaulted on its debts, sparking a string of defaults at other building companies. Analysts described the Chinese government’s approach to Evergrande as a “controlled demolition,” in which authorities allow the company to continue operating as they guide it through a gradual collapse.
Last month, the company disclosed losses of $81 billion over 2021 and 2022.
Since China’s real estate debt crisis began in mid-2021, companies accounting for 40 percent of Chinese home sales have defaulted, according to Reuters. As a result, many homes have been left unfinished and suppliers and creditors left unpaid. Real estate is responsible for a quarter of economic growth in China; property investment declined 7.9 percent in the first half of 2023.
Country Garden, another major developer in China, recently missed payments on its multibillion-dollar debt, further rattling home buyers in the world’s second largest economy.
Theodora Yu contributed to this report.
