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China's Evergrande Group crisis

greggles

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This is starting to get very serious. The Evergrande Group has $300 billion of liabilities and it is increasingly looking like it will default. Some analysts have described the Evergrande crisis as “China’s Lehman Brothers moment”

But the problems with China's property sector look terminal. Ghost cities, overpriced real estate, property development companies failing, projects sitting unfinished. It's all starting to look very untidy, and it could be a major trigger for an economic crisis in China.




Is this the corporate collapse that will kick off a correction on global markets?
 

over9k

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This is starting to get very serious. The Evergrande Group has $300 billion of liabilities and it is increasingly looking like it will default. Some analysts have described the Evergrande crisis as “China’s Lehman Brothers moment”

But the problems with China's property sector look terminal. Ghost cities, overpriced real estate, property development companies failing, projects sitting unfinished. It's all starting to look very untidy, and it could be a major trigger for an economic crisis in China.




Is this the corporate collapse that will kick off a correction on global markets?

Oh you...


(In answer to your question, I'm honestly thinking it more likely than not at this point)
 

over9k

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E_oRo1CXEAQpZOB.jpg

Evergrande is now paying its creditors with properties/assets. No idea if said bonds were secured against the assets but it's happening even if they weren't.
 

Value Collector

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so the other thirty dollar question is will zee bail them out, and I mean not just evergrande because he will have to bail the others if he does the first? can he, probably can, does he want to?
If I had to guess, I think they won’t be bailed out as such, but will be nationalised in some way.
 

Dona Ferentes

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In an announcement [last]n Wednesday, the Chinese Housing Ministry confirmed that Evergrande would not be making interest payments to banks scheduled for Monday. This has raised the uncomfortable possibility that Evergrande’s woes could spread into the Chinese banking system, with potentially far-reaching consequences.

Contagion ? Level playing field for repayments ?
In a recent interview with Bloomberg, Nomura International Hong Kong credit analyst Iris Chen shared her prediction that Beijing will ensure that Evergrande delivers homes to buyers and pays suppliers, but that dollar denominated investors would get only 25 per cent of their money back.
 
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If I had to guess, I think they won’t be bailed out as such, but will be nationalised in some way.
some sort of help for the Chinese population ( workers/buyers. debtors ) looks a likely choice to me

ALTHOUGH China has a solid amount of US denominated debt it could liquidate , and redeem the Evergrande foreign bonds ( at say 90 cents in the dollar face value )

leaving China less exposed to US sanctions in the future

i can't get a good reading of Xi , but he is certainly no klutz

i would love to know who is at risk in Evergrande defaults on the US denominated bonds , it probably wouldn't take much to trigger a GFC ver. 2 ( you can bet they have been leveraged up )
 

Garpal Gumnut

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I've just been down a few rabbit holes on this.

Sentiment is Xi will bail out domestic Chinese property market at a cost but not foreign bond holders.

Fe may fall further as a result and foreign property prices will be hit as Chinese developers sell foreign property assets.

Otherwise its business as usual.

Then its getting towards October.

gg
 

Knobby22

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so the other thirty dollar question is will zee bail them out, and I mean not just evergrande because he will have to bail the others if he does the first? can he, probably can, does he want to?
On ABC they said no one is getting bailed out.
They showed some unfinished residential buildings being collapsed.
Its not the USA. Xi won't look after the wealthy and as we know he is actually taking a few of them on.
 
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i am thinking the minnows and workers first ( if anybody )

but this is China we are talking about , Xi's father was a Chairman Mao general ( so ' tough love ' is very possible )

obviously Nationalization is a possibility as well since Evergrande was a diverse conglomerate

now in the West one option would be the government to grab a major stake ( say 50% ) , but would that be a Chinese option
 
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On ABC they said no one is getting bailed out.
They showed some unfinished residential buildings being collapsed.
Its not the USA. Xi won't look after the wealthy and as we know he is actually taking a few of them on.
RE is a national game there.. similar to Australia except that the IP flats are usually left empty.not bailing them out means a lot of small investors but also retirees with Evergrande coupons and contractors etc will lose..i do not believe Xi can affort not to bail at least some of these ..
 

Knobby22

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i am thinking the minnows and workers first ( if anybody )

but this is China we are talking about , Xi's father was a Chairman Mao general ( so ' tough love ' is very possible )

obviously Nationalization is a possibility as well since Evergrande was a diverse conglomerate

now in the West one option would be the government to grab a major stake ( say 50% ) , but would that be a Chinese option
My guess is the conglomerate will be split up and the good bits sold to help pay the debt.
Also there will be someone who helped run the company publicly trialled and jailed for not acting in accordance with Communist principles.
 

Knobby22

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RE is a national game there.. similar to Australia except that the IP flats are usually left empty.not bailing them out means a lot of small investors but also retirees with Evergrande coupons and contractors etc will lose..i do not believe Xi can affort not to bail at least some of these ..
We shall see. It depends on the whims of a despot.
 

greggles

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This amounts to a fire sale of assets. $300 billion of liabilities is a lot to extinguish by paying with discounted property, especially in an overpriced property market. This is clearly the only option they have, but it's not going to be good for China's property market.

Specific payment methods and details are subject to local conditions, a customer service representative told Reuters on Sunday.

According to a proposal seen earlier by Reuters that Evergrande did not confirm, wealth management product investors can choose from discounted apartments, office, retail space or car parks for repayment.

 
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