The judicial administrators of the Chinese real estate giant Evergrande have reported that the company will withdraw the bankruptcy request filed in the United States in August 2023, with the aim of protecting its assets from creditors while negotiating the restructuring of its debt.
Through a statement sent on Sunday night to the Hong Kong Stock Exchange – where it is listed – the administrators attribute this decision to the fact that the restructuring proposals under which that request was presented are no longer expected to succeed after that the Hong Kong justice system had already ordered the liquidation of Evergrande in favor of its foreign creditors.
The withdrawal of the request to benefit from the protection of the so-called chapter 15 (of title 11 of the US Legislative Code, the one referring to bankruptcies) also affects SJ and Tianji, Evergrande’s main offshore financing platforms.
However, the administrators assured that “all options remain open” and that, if necessary, they will carry out a new bankruptcy application under the aforementioned Chapter 15 “if they consider it necessary or appropriate.”
Suspension of debt payments in the US
These regulations allow foreign companies that are in the process of restructuring to suspend payments on their international debts in the United States; Evergrande assured in August that its dollar-denominated debt was under the jurisdiction of New York, so it submitted the request there.
After the information that arose in this regard in the international press, the promoter assured that it was “a normal process within the framework of the restructuring of its extraterritorial (‘offshore’) debt” and that it did not imply bankruptcy.
On January 29, the Hong Kong Justice ordered the liquidation of Evergrande in favor of its foreign creditors, a ruling that opens a long and uncertain process due to the doubt of whether it will be recognized in mainland China, where the majority of its assets are located, since that the judicial system of the former British colony is separate from the Chinese one by virtue of its semi-autonomous status.
Last year, Evergrande assured, citing a Deloitte analysis, that the recovery rate for investors in the event of a liquidation would be around 3.4%. Evergrande, with a liability of about $330 billion, went into default more than two years ago after suffering a liquidity crisis due to the restrictions imposed by Beijing on the financing of developers with a high level of leverage, after which it was intervened by the Chinese authorities.
Visible face of China’s real estate crisis
The group, which has become the main visible face of the real estate crisis in China, was plunged into new turbulence at the end of 2023 after its founder and president, Xu Jiayin, was placed under a kind of house arrest for “suspicions of activities “. “illegal.”
Last week, China’s stock market regulator fined Evergrande’s main subsidiary, Hengda Real Estate, a fine equivalent to about $578 million for falsifying more than $78 billion in revenue during 2019 and 2020, as well as other 12.7 billion dollars in profits. This last figure, according to Bloomberg, is 20 times greater than the profit falsification scandal of the American company Enron in 2001.
