China Evergrande Group
filed for Chapter 15 bankruptcy protection in New York late Thursday.
A Chapter 15 bankruptcy is a way for foreign companies with U.S. assets to get access to domestic courts, and protect it from U.S. creditors while it restructures overseas.
China’s second-largest developer earlier this month reported narrowing losses for 2022 as it reined in costs. Evergrande defaulted in late 2021. In recent sessions, investors have worried about another troubled Chinese developer, Country Garden Holdings, whose bonds were downgraded to deteriorating from stable by research company GimmeCredit on Wednesday.
Heavily-indebted Evergrande, which has symbolized China’s property crisis, made its filing amid growing fears that the sector’s troubles will spread to other parts of the country’s economy.
Since mid-2021, companies accounting for 40% of Chinese home sales have defaulted, stoking fears about the resilience of the world’s second-largest economy.
Spillover from Evergrande’s 2021 debt woes rattled investors in stocks and spurred a flight to safety in U.S. government bonds. Investors this week have been closely monitoring developments in China’s property markets.
Stocks were headed for another week of losses on Thursday, with the Dow Jones Industrial Average
off 2.3% so for the week, the S&P 500 index
2.1% lower and the Nasdaq Composite Index off 2.4%, according to FactSet.
Chris Low, FHN Financial’s chief economist, said the “mess in China” was resulting in a flight-to-quality bid for 10-year Treasurys, in a Wednesday note to clients. The 10-year yield
shot up to 4.307% on Thursday, the highest since November 2007, according to FactSet.