Chinese builder Yuzhou seeks debt restructuring recognition in US

Yuzhou Group Holdings filed for Chapter 15 bankruptcy on Thursday in New York, a move by the defaulted property developer to seek US court recognition for its offshore debt restructuring and ward off litigation.

The Shenzhen-based builder, which failed to pay US$2.9 billion of dollar notes with interest as of the end of 2023, is undergoing restructuring in Hong Kong and the Cayman Islands.

Its board was advised to “seek recognition by this court of the Hong Kong proceeding as a foreign main proceeding for the debtor”, according to a company filing with the court. Without US court recognition, “it may be possible that creditors of such indebtedness will commence proceedings in New York against the company even after the schemes are sanctioned”, it said.

Yuzhou joins a growing list Chinese developers, including Sunac China Holdings and China Aoyuan Group to use the Chapter 15 bankruptcy system to deal with offshore creditors or handle cross-border assets.

A Chapter 15 recognition proceeding is a legal step for the US court to formally recognise the effectiveness of the restructuring in foreign jurisdictions, according to an insight note by law firm Sidley Austin last year.

Companies do not necessarily need material US assets to seek such recognition, and often the only liabilities of Chapter 15 debtors are US-law governed bonds, the note said, in explaining the differences with the better-known Chapter 11 filings.