China Aoyuan Group Ltd. filed for chapter 15 protection in New York on Wednesday, a move by the defaulted property developer to seek U.S. court recognition for its offshore debt restructuring and ward off litigation, Bloomberg News reported. The Guangzhou-based developer, which had about $6 billion of total offshore interest-bearing liabilities as of the end of 2022, is undergoing restructuring in Hong Kong, Cayman Islands and the British Virgin Islands after deciding last year to forgo paying debt. Its board has been counseled by its advisers to “seek recognition of the Hong Kong proceedings and related relief from the US Bankruptcy Court for the Southern District of New York,” according to a company filing with the court. Without U.S. court recognition, “there is litigation risk that dissenting holders of the existing public notes may file actions to enforce their claims in the U.S. courts even after the Hong Kong schemes are sanctioned by the Hong Kong court,” it said. Aoyuan joins a small but growing list of Chinese developers — as well as other non-U.S. debtors — to tap chapter 15 protection to more efficiently deal with offshore creditors or handle cross-border assets. China Evergrande Group, whose 2021 default accelerated the country’s property debt crisis, called the move a “normal procedure” since its dollar bonds are governed by New York law.
