The move protects it from creditors in the US while it works on a restructuring deal elsewhere. The Chinese homebuilder’s Chapter 15 petition references restructuring proceedings being carried out in Hong Kong and the Cayman Islands.

International debt-restructuring deals sometimes require a Chapter 15 filing in the course of finalizing a transaction. Last year, Beijing-based developer Modern Land China Co. also filed for Chapter 15 bankruptcy after failing to repay a $250 million bond and saying it would go forward with an offshore debt restructuring deal.

Evergrande’s fate has broad implications for China’s $60 trillion financial system, and could send ripples across banks, trusts and millions of home owners, in what would be one of the nation’s largest-ever restructurings. The sheer size of its liabilities of more than $300 billion mean that the process is sure to be long.

Sentiment toward Chinese markets has been shaken this month after one of the country’s biggest property developers, Country Garden Holdings Co., lurched toward a possible first default, amid record debt failures by builders. The situation worsened in recent days when financial conglomerate Zhongzhi Enterprise Group Co. raised alarm after affiliated firms missed payments on some investment products.

China’s property debt crisis is rapidly deepening, as it heads into its fourth year. Developers accustomed to binging on debt to fuel development sprees experienced the first inkling of change in 2020. That’s when authorities laid out “three red lines” that set leverage benchmarks builders had to meet if they wanted to borrow more money. Chinese junk dollar bonds, largely issued by developers, have fallen into distress, with average prices now at about 65 cents, according to a Bloomberg index.

Evergrande has been working for months to wrap up an offshore debt restructuring plan. The firm in April disclosed it didn’t yet have the level of creditor support needed to implement the plan. In July, it received court approval to hold votes on the deal. The company said earlier this week that it had rescheduled so-called scheme meetings for creditors until Aug. 28.

Evergrande first defaulted on a dollar bond in December 2021 following months of uncertainty about its finances. The company’s struggles helped set off the initial wave of concerns about China’s property sector that has kept growing.

Evergrande’s electric-vehicle unit agreed to sell a roughly 28% stake to Dubai-based startup NWTN Inc., sending the carmaker’s shares soaring earlier this week on expectations the deal could keep it in business. NWTN will invest $500 million in China Evergrande New Energy Vehicle Group Ltd. in exchange for shares and a majority of the EV maker’s board, the companies announced Monday.

“Evergrande’s debt plan could be helped by the developer’s disposal” of the stake, Bloomberg Intelligence analysts Daniel Fan and Adrian Sim wrote. NWTN could become the largest shareholder upon full exchange of the unit’s mandatory exchangeable bonds, and the EV unit’s funding access would help the value of those securities in Evergrande’s debt plan as well as normalizing production of its Hengchi 5 EVs, they said.

A bankruptcy lawyer for Evergrande didn’t immediately respond to a request for comment. Its Scenery Journey unit also filed for Chapter 15 protection, along with affiliate Tianji.

The case is China Evergrande Group and Jimmy Fong, 23-11332, U.S. Bankruptcy Court for the Southern District of New York (Manhattan).