China’s Evergrande Files for Chapter 15 Bankruptcy in New York
China’s second largest property developer, Evergrande, has reportedly filed for Chapter 15 bankruptcy in New York. The move aims to protect its assets within the United States from creditors. Evergrande’s Chapter 15 petition reveals active restructuring proceedings taking place in Hong Kong and the Cayman Islands. An associated firm named Tianji Holdings has also pursued Chapter 15 protection in a Manhattan bankruptcy court.
Evergrande’s Near-Bankruptcy Scare in 2021
Only two years ago, Evergrande was reportedly teetering on the brink of bankruptcy. In September 2021, reports indicated that Evergrande was on the verge of debt default, with $300 billion worth of liabilities. The company urgently required funds, with its core entity having only $32 billion, approximately 10% of its total liabilities, according to its year-end commercial report for 2021. There were fears over the potential consequences for stablecoin Tether, which relied on commercial paper and certificates of deposits for backing, with nearly half of its assets tied to Evergrande.
Tether’s Statement on Exposure to Evergrande
At the time of reporting, Tether stated that it had no exposure to Evergrande. The company clarified that it did not hold any commercial paper or other debt or securities issued by Evergrande and had never done so. Tether’s published statements and assurance attestation confirmed that the vast majority of its commercial paper holdings were in A-2 and above rated issuers.
Closing Thoughts
Evergrande’s filing for Chapter 15 bankruptcy in New York highlights the extent of its financial struggles and the need to protect its assets. The near-bankruptcy scare in 2021 raised concerns about the potential impact on stablecoin Tether and its assets tied to Evergrande. Tether’s assurance that it had no exposure to Evergrande provided some relief to the crypto community. This developing story will continue to be closely watched by industry observers.
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