Business Evergrande Group has officially defaulted

Evergrande officially defaulted - DMSA is preparing bankruptcy proceedings against Evergrande Group

/PRNewswire/ -- China Evergrande Group today again defaulted on interest payments to international investors. DMSA itself is invested in these bonds and has...

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BERLIN, Nov. 10, 2021 /PRNewswire/ -- China Evergrande Group today again defaulted on interest payments to international investors. DMSA itself is invested in these bonds and has not received any interest payments until today's end of the grace period. Now DMSA is preparing bankruptcy proceedings against Evergrande and calls on all bond investors to join it.


China Evergrande Group, the second largest real estate developer in China, defaulted on interest payments on two bonds back in September, with the 30-day grace period still ending in October. However, shortly before the end of the grace period, the public was misled by rumors about alleged interest payments. The international media also took the rumors for granted. Only the DMSA - Deutsche Marktscreening Agentur (German Market Screening Agency) already recognized the default at that time and proved in a study that the bankruptcy of Evergrande, the world's most indebted corporation, could ultimately lead to a "Great Reset", i.e. the final meltdown of the global financial system.


(Note to journalists: See DMSA press releases dated Oct. 25 and Oct. 29, 2021, and the DMSA study "The Great Reset - Evergrande and the Final Meltdown of the Global Financial System"; all available via the DMSA homepage www.dmsa-agentur.de.)


"But while the international financial market has so far met the financial turmoil surrounding the teetering giant Evergrande with a remarkable basic confidence - one can also say: with remarkable naivety - the U.S. central bank Fed confirmed our view yesterday," says DMSA senior analyst Dr. Marco Metzler. "In its latest stability report, it explicitly pointed out the dangers that a collapse of Evergrande could have for the global financial system."


In order to be able to file for bankruptcy against the company as a creditor, DMSA itself invested in Evergrande bonds, whose grace period expired today (Nov. 10, 2021). In total, Evergrande would have had to pay $148.13 million in interest on three bonds no later than today. "But so far we have not received any interest on our bonds," explains Metzler. He adds, "With banks in Hong Kong closing today, it's certain that these bonds have defaulted."


(Note to editors: Exact details of the bonds that have defaulted so far can be found in the appendix to this press release.)


Particularly problematic for Evergrande: all 23 outstanding bonds have a cross-default clause. "This means that if a single one of these bonds defaults, all 23 outstanding bonds automatically have 'default' status" DMSA senior analyst Metzler knows. However, this does not automatically result in a bankruptcy for Evergrande Group. To determine bankruptcy, a insolvency petition must be filed with the court. This can be done either by the company itself or by one or more of the company's creditors. And this is precisely what is now planned. Metzler: "DMSA is preparing bankruptcy proceedings against Evergrande. We are already holding talks with other investors in this regard. We would be pleased if other investors were to join our action group."


For the DMSA expert, it is clear: "As soon as a court opens insolvency proceedings, Evergrande will also be officially bankrupt - and that is only a matter of days."

 

[chiobu]

What's gonna happen? Inflation's gonna get worse?

 

[Audit]

I'm expecting a Chinese bailout of Evergrande. No way are they letting their economy collapse over a few hundred million dollars of missed interest payments.

 

[usernames can change now!]

What's gonna happen? Inflation's gonna get worse?

We get to find out what banks are heavily exposed to Evergrande bonds. If anyone was too heavily exposed, they might need to start selling assets to make up for the losses. If too many banks need to sell assets, see March 2020.

 

[Enig]

We get to find out what banks are heavily exposed to Evergrande bonds. If anyone was too heavily exposed, they might need to start selling assets to make up for the losses. If too many banks need to sell assets, see March 2020.

For what it's worth Blackrock invested quite a lot. This could be the hilarious karmic payback for them.

 

[pwnest injun]

It's not so much the economy as it is the life savings of some 20% the [former] Chinese middle class. Of course, it affects a lot of businesses too, but this is the death of the middle class writ large.

Edit: By the time the downstream effects are finished, they'll have to restructure the entire economy to stave off revolt. Get ready for The Great Reset redistribution!

 

[usernames can change now!]

It's not so much the economy as it is the life savings of some 20% the [former] Chinese middle class. Of course, it affects a lot of businesses too, but this is the death of the middle class writ large.

A significant enough injury to Chinese middle class ambitions could cause political unrest. The CCP might do something provocative to distract from it.

 

[IAmNotAlpharius]

Well shit. Let’s see what happens now boys.

 

[Splinters RCVD ✞]

Timely for the next 'dark winter'. Brace for impact ladies and gents.

 

[Knight of the Rope]

We get to find out what banks are heavily exposed to Evergrande bonds. If anyone was too heavily exposed, they might need to start selling assets to make up for the losses. If too many banks need to sell assets, see March 2020.

Yep. Evergrande is the first domino, now we get to see how many other dominoes are piled up behind it. BlackRock and UBS Group AG (a Swiss bank) are significant bagholders, or at least were the last time they told anyone about their assets.

Lots of bugmen over in China are going to be fucked by this development, at least at first. As @pwnest injun pointed out, they're already struggling to keep the lights on these days, and now they're faced with generations of their family's wealth evaporating before their eyes (unless Xi steps in to cover costs, which is probably likely). In the meantime, there will be chaos. There were plenty of other real estate groups missing bond repayments lately, so it makes one wonder whether there's any actual intrinsic value in China's property markets at all, or if it's just the Chinese jewing each other for the last 50 years (smart money is pointing to that second one).

For anyone who's not a chink NPC though, you probably don't have too much to worry about from this. Unless you want to profit, in which case watch very carefully to see how the contagion spreads and react accordingly and you'll be laughing all the way to the bank.

 

[No. 7 cat]

For what it's worth Blackrock invested quite a lot. This could be the hilarious karmic payback for them.

The thing is that they will pile the costs on whoever is below them on the financial ladder and eventually that works its way down to the customer, adding to their misery.

 

[Splinters RCVD ✞]

A significant enough injury to Chinese middle class ambitions could cause political unrest. The CCP might do something provocative to distract from it.

Like a military stunt at Taiwan?

 

[Sweet and Savoury]

Winnie the Pooh will have to do something

Evergrande is a keystone in the China economy and if it fails the aftershocks will be dire. So many chinks have money either on deposit with Evergrande or invested in Evergrande itself.

I foresee much gnashing of teeth and wailing but something will be done. Evergrande is too big to fail.

 

[usernames can change now!]

Like a military stunt at Taiwan?

Not before Beijing 2022 Olympics, imo.

 

[Death Grip]

Just found this from September in the Financial Assets.
'This, in our view, is the most important reason the parallels with Lehman are overblown. Quite simply, financial crises are liability-side driven. They start on the asset side, but then morph into a crisis when lenders pull away. Consider the Lehman case. Across late 2007 and into 2008, markets worried about the quality of Lehman’s assets (most prominent was the $23.7bn leveraged buyout of a large portfolio of apartment buildings – Archstone – which was ultimately sold in 2012 for just $6.5bn). But in response to these fears on the asset side, something else had to occur; in late summer 2008, the wholesale funding markets turned on Lehman. Banks refused to face Lehman as a counterparty or extend credit. The firm suddenly couldn’t roll over commercial paper, and then counterparty risk exploded, as banks became fearful of each other. And with the US sovereign unable/unwilling to step in to backstop Lehman’s liabilities (or inject new equity) and focused on the ‘moral hazard’ associated with bailing the firm out, Lehman defaulted on its liabilities (off- and on-balance sheet) sparking a full-fledged financial crisis.

China’s situation is very different. Not only are the property sectors’ linkages to the financial system not on the same scale as a large investment bank, but the debt capital markets are not the only, or even the primary, means of funding. The country is, to a large extent, a command-and-control economy. In an extreme scenario, even if capital markets are shut to all Chinese property firms (which is not occurring and is only a tail risk at this point), regulators could direct banks to lend to such firms, keeping them afloat and providing time for an extended ‘work-out’ if needed. The only way to get a widespread lenders’ strike in a strategically important part of the economy would be if there were a policy mistake, where the authorities allow the chips to fall where they may (perhaps to impose market discipline), regardless of the systemic implications. And we think that’s very unlikely; the lesson from Lehman was that moral hazard needs to take a back seat to systemic risk.

We don’t mean to imply that China has succeeded in suspending the laws of economics. If an asset can’t fully service the underlying debt, it of course matters. But the economics can show up through either a one-time (violent) balance sheet adjustment – aka a financial crisis – or through many quarters of income statements (a debt bubble being deflated). We also don’t mean to suggest that China could never have a Lehman moment. But with the banking system likely to be pressed into service as a funding source in the event of real stress, China would likely face a ‘true’ financial crisis only if its banks had funding problems. This risk was high in 2015, when the country saw over a trillion dollars of capital flight, meaning there was something of a ‘run’ on the domestic financial markets as a whole. But as we argued in China Financial systemic risks: why 2020 is not 2015, Thinking Macro, Feb 24, 2020, policymakers are now attuned to, and in control, of this risk.

A prospective Evergrande default is still a serious issue. But, we think, the effects are primarily on growth, and unlikely to be exacerbated by a financial crisis. This is a challenging moment for Chinese authorities but to our mind it is far from being China’s Lehman moment. '

Archive: https://archive.st/v1d2

 

[A Cardboard Box]

What's gonna happen? Inflation's gonna get worse?

Likely the opposite. The current inflation isn't actually a fiscal issue like in Weimar Germany or something. The current inflation is a supply issue. Demand is the same while supply is less because of the transportation issues. As soon as the transportation issues are resolved inflation will go back to normal and likely reverse somewhat.

The collapse of Evergrande will crunch creditors and bond holders that now have to foot the bill for hundreds of billions in unsecured toxic debt, which will likely drastically reduce currency flow as everyone even tangentially related to the collapse hordes their money to ride out the inevitable shit storm. Less money actively circulating in the economy means that people will reduce prices to compensate, so people that have money are more enticed to spend it, this is because the large majority of vendors buy in inventory on credit, and if they don't move their inventory, they, too, will default. This is what's called a deflationary spiral, where everyone continuously tries to undercut their own prices to move in increasing amount of inventory.

While this may sound good in theory, everyone wants their money to be worth more, the most damaging fallout from the 2008 financial crisis was the ensuing credit crunch and deflationary spiral that forced massive businesses downstream from the initial damage into default.

 

[LurkTrawl]

Likely the opposite. The current inflation isn't actually a fiscal issue like in Weimar Germany or something. The current inflation is a supply issue. Demand is the same while supply is less because of the transportation issues. As soon as the transportation issues are resolved inflation will go back to normal and likely reverse somewhat.

The collapse of Evergrande will crunch creditors and bond holders that now have to foot the bill for hundreds of billions in unsecured toxic debt, which will likely drastically reduce currency flow as everyone even tangentially related to the collapse hordes their money to ride out the inevitable shit storm. Less money actively circulating in the economy means that people will reduce prices to compensate, so people that have money are more enticed to spend it, this is because the large majority of vendors buy in inventory on credit, and if they don't move their inventory, they, too, will default. This is what's called a deflationary spiral, where everyone continuously tries to undercut their own prices to move in increasing amount of inventory.

While this may sound good in theory, everyone wants their money to be worth more, the most damaging fallout from the 2008 financial crisis was the ensuing credit crunch and deflationary spiral that forced massive businesses downstream from the initial damage into default.

So, we're still fucked. Great.

 

[melty]

Although I'm sure it would be a disaster in ways I can't foresee, it would be kind of sweet to see BlackRock take a hit. Maybe they will sell some of those houses they're hoarding at a loss.

 

[Another Sperg on the Net]

Just found this from September in the Financial Assets.
'This, in our view, is the most important reason the parallels with Lehman are overblown. Quite simply, financial crises are liability-side driven. They start on the asset side, but then morph into a crisis when lenders pull away. Consider the Lehman case. Across late 2007 and into 2008, markets worried about the quality of Lehman’s assets (most prominent was the $23.7bn leveraged buyout of a large portfolio of apartment buildings – Archstone – which was ultimately sold in 2012 for just $6.5bn). But in response to these fears on the asset side, something else had to occur; in late summer 2008, the wholesale funding markets turned on Lehman. Banks refused to face Lehman as a counterparty or extend credit. The firm suddenly couldn’t roll over commercial paper, and then counterparty risk exploded, as banks became fearful of each other. And with the US sovereign unable/unwilling to step in to backstop Lehman’s liabilities (or inject new equity) and focused on the ‘moral hazard’ associated with bailing the firm out, Lehman defaulted on its liabilities (off- and on-balance sheet) sparking a full-fledged financial crisis.

China’s situation is very different. Not only are the property sectors’ linkages to the financial system not on the same scale as a large investment bank, but the debt capital markets are not the only, or even the primary, means of funding. The country is, to a large extent, a command-and-control economy. In an extreme scenario, even if capital markets are shut to all Chinese property firms (which is not occurring and is only a tail risk at this point), regulators could direct banks to lend to such firms, keeping them afloat and providing time for an extended ‘work-out’ if needed. The only way to get a widespread lenders’ strike in a strategically important part of the economy would be if there were a policy mistake, where the authorities allow the chips to fall where they may (perhaps to impose market discipline), regardless of the systemic implications. And we think that’s very unlikely; the lesson from Lehman was that moral hazard needs to take a back seat to systemic risk.

We don’t mean to imply that China has succeeded in suspending the laws of economics. If an asset can’t fully service the underlying debt, it of course matters. But the economics can show up through either a one-time (violent) balance sheet adjustment – aka a financial crisis – or through many quarters of income statements (a debt bubble being deflated). We also don’t mean to suggest that China could never have a Lehman moment. But with the banking system likely to be pressed into service as a funding source in the event of real stress, China would likely face a ‘true’ financial crisis only if its banks had funding problems. This risk was high in 2015, when the country saw over a trillion dollars of capital flight, meaning there was something of a ‘run’ on the domestic financial markets as a whole. But as we argued in China Financial systemic risks: why 2020 is not 2015, Thinking Macro, Feb 24, 2020, policymakers are now attuned to, and in control, of this risk.

A prospective Evergrande default is still a serious issue. But, we think, the effects are primarily on growth, and unlikely to be exacerbated by a financial crisis. This is a challenging moment for Chinese authorities but to our mind it is far from being China’s Lehman moment. '

Archive: https://archive.st/v1d2

There are not enough in the world that post given how shaky the Chinese banking sector is after having been propped up by government money for years. As this spreads beyond Evergrande China won't be able print enough Yuan to bail everyone out without serious devaluation or simply allowing this to play out, eother of which leads to serious social unrest. A real damnes if you do damned if you don't moment for them.

 

[God of Nothing]

This is what happens when you let a couple of retards gain influence in the economy in general. Maybe actually produce something of worth, you propped up commie shits.