China property giant Evergrande files for bankruptcy as global contagion fear looms

• Evergrande seeks protection under Chapter 15 of bankruptcy code.
• Firms accounting for 40% of Chinese home sales defaulted.
• Country Garden also worrying investors after missing payments.

NEW YORK: China Evergrande which is the world's most heavily indebted property developer and became the poster child for China's property crisis, Thursday filed for protection from creditors in a US bankruptcy court.

The company sought protection under Chapter 15 of the US bankruptcy code, which shields non-US companies that are undergoing restructurings from creditors that hope to file lawsuits or tie up assets in the United States.

Tianji Holdings, a related company, also sought Chapter 15 protection Thursday in Manhattan bankruptcy court.

A lawyer for Evergrande did not immediately respond to requests for comment.

Evergrande's filing comes amid growing fears that problems in China's property sector could spread to other parts of the country's economy as growth slows.

Since the sector's debt crisis unfolded in mid-2021, companies accounting for 40% of Chinese home sales have defaulted.

The health of Country Garden, China's largest privately run developer, is also worrying investors after the company missed some interest payments this month.

Evergrande recently had $330 billion of liabilities. A late 2021 default triggered a string of defaults at other builders, resulting in thousands of unfinished homes across China.

Last month, Evergrande posted a combined $81 billion loss for 2021 and 2022, prompting investor worries about the viability of a debt restructuring plan it proposed in March.

On Monday, its electric-vehicle unit China Evergrande New Energy Vehicle Group announced its own proposed restructuring to reduce debt.

That plan called for a $2.7 billion debt-for-equity swap, and a nearly $500 million share sale that would give Dubai's NWTN a 27.5% stake.

Trading in China Evergrande shares was suspended in March 2022.