In a reverberation felt across the cryptocurrency landscape, China's Evergrande Group's recent bankruptcy filing has triggered substantial drops in major digital assets and has cast a shadow of doubt over the backing of Tether, a prominent stablecoin. Once a pinnacle of China's property development sector, Evergrande has morphed into a symbol of the country's ongoing real estate turmoil.
On August 17, Evergrande sought refuge from its creditors by invoking Chapter 15 protection under the US bankruptcy code. This provision affords non-US companies a shield during restructuring, enabling them to hold creditors at bay.
Echoing this move, Evergrande's affiliate, Tianji Holdings, took similar steps in a Manhattan bankruptcy court. This development underscores the growing apprehension that the property sector's distress might seep into other areas of the economy, particularly in the midst of faltering growth.
With Evergrande shouldering an astronomical $330 billion in liabilities and having defaulted in late 2021, a domino effect has ensued.
Since the debt crisis emerged in mid-2021, companies responsible for 40 per cent of Chinese home sales have defaulted. This dire situation has left behind thousands of unfinished homes and unsettled investors.
Yet, Evergrande isn't merely folding its hand. Restructuring negotiations are underway in Hong Kong, the Cayman Islands, and the British Virgin Islands. In the coming weeks, creditors could cast their votes on a restructuring plan, with potential endorsement from the courts in Hong Kong and the British Virgin Islands by early September.
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