China Aoyuan Group Seeks US Bankruptcy Protection Amid Debt Restructuring

China Aoyuan Group (3883), a real estate firm grappling with default, has turned to the US legal system for aid, filing for Chapter 15 bankruptcy in New York on Wednesday. This strategic move is designed to gain US court recognition for its debt restructuring efforts concerning offshore liabilities and to protect against potential lawsuits.

The Guangzhou-based property mogul, which reported approximately US$6 billion (HK$46.8 billion) in offshore interest-bearing debts by the end of 2022, has been navigating restructuring processes in multiple jurisdictions, including Hong Kong, the Cayman Islands, and the British Virgin Islands. The decision comes after the developer opted last year not to repay its debt obligations.

According to court documents, the company's board has followed advice from financial consultants to pursue the acknowledgment of its Hong Kong proceedings by the US Bankruptcy Court for the Southern District of New York. This recognition is critical to mitigate risks associated with dissenting creditors who might seek to enforce claims in US courts despite any sanctions from Hong Kong courts.

Aoyuan is now among a growing number of Chinese developers and international debtors using Chapter 15 to navigate their financial difficulties with offshore creditors and to manage cross-border assets more effectively. 

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