Du Qingqing: What impact does housing company apply for ＂bankruptcy protection＂ in

Source: First Finance

Author: Du Qingqing

On the last working day before the National Day of China, Evergrande announced a heavy news -Xu Jiayin was taken for mandatory measures for suspected illegal crimes, and the company's shares were suspended.

More than a month ago, Evergrande just applied for the so -called "bankruptcy protection" in the United States.This undoubtedly made Evergrande's domestic creditors and buyers more worried.At the same time, some market participants apply for "bankruptcy protection" in the process of housing companies in the process of US dollar debt reorganization. They may leak Chinese economic data and foreign investors will give priority to domestic investors to get compensation.

Why does Evergrande apply for "bankruptcy protection" in the United States?Who is the right to protect?How does it affect domestic creditors?Will this make it difficult for the "guarantee to be intertwined"?

"Bankruptcy Protection" is essentially applying for recognition procedures

"Because the Group's US dollar bonds are under the jurisdiction of the New York Law, the Company applied to the US court to recognize the US court to recognize the overseas debt reorganization agreement under the British Virgin Islands (BVI) legal system according to the US CodeSome of the overseas reorganization procedures. "The announcement stated that it did not involve bankruptcy applications.

However, many market participants expressed concerns.For example, some opinions believe that "bankruptcy protection" means protecting shareholders' personal assets, not to protect creditors and owners of rotten tail buildings."If the" bankruptcy protection "in the United States has successfully applied for the" bankruptcy protection ", Evergrande's overseas assets will start the bankruptcy process, and overseas capital will ask the guarantor to ask for money, that is, the bank of China."Relatives' personal assets overseas will be protected after applying for "bankruptcy protection", but the rights and interests of creditors and owners of rotten buildings will not be protected.

But in essence, applying for "bankruptcy protection" is the application for approval procedures, not to start the bankruptcy process.

"There is a substantial difference between the application for approval procedures and bankruptcy liquidation applications." Liu Guangxiang, a partner of Kim Cheng Tongda Law Firm, said that Evergrande Group and other enterprises have proposed to the New York Court to recognize its restructuring agreement arrangements in Hong Kong and Cayman Courts.The application for procedures is a established arrangement for promoting overseas debt reorganization. It is a customary practice of overseas debt reorganization. The essence is to seek the recognition and protection of the procedure of the US dollar debt reorganization agreement to ensure that they are reorganized overseas in the United States.It will not be sued or applied for assets in the United States in the United States.

Liu Guangxiang explained that the purpose of applying for recognition procedures is to fight for the acceptability of the US court recognition of the reorganization agreement in the United States to prevent individual creditors using the obligations stipulated by the New York regulations to avoid the reorganization agreement and use individual lawsuits in the United States to sacrifice all the wholeThe interests of creditors seeks individual interests at the cost.This procedure is conducive to ensuring the smooth progress of the reorganization arrangements reached in the early stage, ensuring the normal production and operation of enterprises, rather than led to bankruptcy liquidation.

What is "Application Program"

Except for Evergrande, many companies including Jiazhaoye, Contemporary Real Estate, and Rongsheng Development have previously applied for recognition procedures in the United States during the US dollar debt reorganization process.

According to industry insiders, most of these companies are registered in the Cayman Islands or Virgin Islands, issuing USD bonds in Hong Kong, and in accordance with US dollar bond issuance practice in the bond fundraising instructions, US laws or British laws are applied when disputes occur in the instructions.With the gradual exposure of debt risks, these companies have launched debt restructuring procedures abroad. They usually apply for recognition from the New York court after completing the debt reorganization agreement arrangements in Hong Kong, Cayman and the British Virgin Islands Court.

The New York Court ruling is based on Chapter 15 of the US Bankruptcy Law.The US bankruptcy law stipulates a variety of paths for debt issues, including but not limited to debt restructuring and bankruptcy liquidation.EssenceNon -American companies, which are trapped in financial dilemma, have applied for the recognition procedure of Chapter 15 to avoid the holders of overseas US dollar bonds to file a lawsuit or execute debtor assets in the United States under the United States.The recognition and assistance of the US court's recognition of overseas debt reorganizations of enterprises belongs to the subsidiary procedures for debt reorganization procedures conducted in other judicial jurisdictions.

"The purpose of applying for recognition procedures is to ensure that the debtor does not be filed by the creditors in the United States, so as to ensure the execution of the restructuring plan." A lawyer who concerned about Evergrande's debt reorganization told the First Financial that the overseas debt restructuring planOnly the assets that are attributed to foreign creditors in accordance with the law are included in the scope of debt repayment resource, which does not involve the problem of distinguishing between domestic and foreign creditors.The New York Court only reviews whether the reorganization agreement arrangements can be obtained in the United States, and do not comment on the content of the restructuring plan, and there is no problem to treat the rights and interests of domestic and foreign creditors.

Affects geometry on domestic creditors

China Evergrande Half -annual report shows that the company's total debt at the end of June has reached 2.39 trillion (RMB, the same below, S $ 450 billion), and the contract liabilities are still as high as 1.78 trillion, an increase of 67.8 billion from the end of 2022.

Some securities firms believe that Evergrande's application for recognition procedures in the United States has limited impact on domestic debt disposal and insured work.

"Most of the relevant entities related to overseas debt reorganization are registered abroad. It is not a domestic bond issuer. There is a multi -layer equity interval between the main entities of the domestic business.Jurisdiction. Even if the US courts finally did not recognize the debt reorganization procedures, the foreign creditors applied for the implementation of the domestic assets of Singapore directly held by the overseas reorganization subject, and the people's court must be implemented after the US court was recognized. "Seeing that the US courts are relatively cautious in using public policy to refuse to acknowledge and assist foreign procedures, and they generally recognize relevant reorganization arrangements.Therefore, the application for recognition procedures is expected to not have a great adverse effect on domestic debt disposal and insurance work.

The person proposed that the US dollar bonds have the "inferior" nature in the law, and need to respond to the risk of US dollar bond defaults based on the principle of marketization and rule of law.According to the Civil Code and relevant judicial interpretations, the order of debt repayment of housing enterprises is "consumer buyer GT; construction project price GT; guarantee claim GT; ordinary debt GT; equity."Under the issuance of mainstream US dollar bonds, domestic housing companies can return overseas controllers' debts only under the form of "remaining equity" if they repay all debt and still have surplus.Due to the "inferior" nature of the law, the US dollar debt of domestic housing companies that are in danger have obvious high yields and high -risk characteristics, and even have the nature of foreign "junk debt". Related investors should have clear expectations for this.

In addition, some lawyers said that in the application for approval procedures, the New York Court mainly conducted a formal review and requested providing judicial documents for overseas courts on trials of bankruptcy or reorganization cases.The information provided by the enterprises in the relevant cases is mainly the operation and debt information disclosed by listed companies, the voting of the restructuring exhibition plan and the court ruling, etc., and the scope is limited.