Hmm, new thread title?

rnish · Nov 5, 2021

kairo[OP] said: ↑

Credit analyst on real estate giant

"Evergrande bankruptcy has already factually occurred"

Can stumbling real estate giant Evergrande still pay its debts? Credit analyst Marco Metzler doesn't think so: He is convinced Evergrande has long been bankrupt - and is challenging the group.

The interview was conducted by Lutz Reiche

05.11.2021, 2.37 p.m.

How big a threat does China's teetering real estate developer Evergrande pose to the global economy? International banks and private investors have lent the group around $23.7 billion - which they want interest on and repaid. So if Evergrande collapses, the corporation will take others with it. Recently, media such as the "New York Times" have been reporting warning signs, but experienced credit analyst Marco Metzler disagrees.

manager magazin: Mr. Metzler, in your latest analysis, you basically claim that Evergrande has long been bankrupt. What makes you say that?

Marco Metzler: The fact is that Evergrande and Citibank, as trustee and paying agent for the interest payments, have not yet officially confirmed a single payment of the interest that has been overdue for more than 30 days. The source referred to by the "New York Times" and other media is a single, allegedly anonymous creditor who is said to have told the media a few hours before the deadline that he had received the interest payment.

What do you conclude from this?

The fact that there is no confirmation of receipt of payment from any official source and that the sources are being treated in such a non-transparent manner raises concerns. There remain considerable doubts as to whether money has really flowed, and if at all, possibly only to individual creditors of the offshore bond. Here Evergrande is apparently repeating the same game as it did on October 23.

What do you mean by that?

Evergrande and Citibank have not officially confirmed any alleged interest payments of $83 million, even at this time. We have asked numerous investors known to us, they could not confirm any receipt of payment. In our view, this obviously means that the Evergrande bankruptcy has already effectively occurred. This also means that all other 22 bonds issued are considered to be in default under the cross-default principle. This is how it is regulated in the bond terms and conditions. This means that bruised investors can now file for insolvency.

The fact is, so far Evergrande has not been declared insolvent. So how much is at stake for foreign investors?

In fact, according to official figures, Evergrande owes 90 percent of its loans and payments to Chinese creditors. But that by no means makes the case a purely Chinese problem. According to our latest information, international investors alone have put about $23.7 billion into 23 bonds and three large loans. Analysts at Fitch expect Evergrande to be liquidated in the event of bankruptcy. Creditors are unlikely to be paid much more than 5 percent of their claims then. In other words: International investors would then have to write off around $22.5 billion in the event of Evergrande's insolvency.

22.5 billion dollars - distributed among hundreds of foreign creditors - that sounds manageable and not like an imminent "meltdown of the global financial system," as you write in your study.

Focusing only on Evergrande and these creditors, the risk may seem manageable. But if one follows the calculations of the renowned Chinese business magazine "Caixin", Evergrande will have to find a total of around 123 billion dollars for interest and repayments within the next twelve months. In total, the foreign loans of international investors in China amount to 586 billion dollars, of which around 30 billion dollars have already defaulted in 2020. If the Chinese state does not step in to cover this, we must already consider Evergrande's bankruptcy a certainty. Moreover, we must not look at Evergrande in isolation: The completely overheated real estate sector accounts for up to 30 percent of China's economic output. Any major bankruptcy could drag down other Chinese real estate companies, banks and insurers with it.

With what consequences for other countries?

Probably with considerable consequences. According to Goldman Sachs, the foreign debts of Chinese real estate developers alone amount to around 197 billion U.S. dollars. The major international bank HSBC, for example, reports loans of $19.6 billion for the third quarter that it extended exclusively to Chinese real estate groups. In total, HSBC has extended $196 billion in credit to Chinese companies in all sorts of industries. In addition: International banks with strong Asian operations sometimes lend to wealthy Chinese, which in turn are backed by Chinese debt instruments. These loans could then also default. However, this aspect may not be seen at all at the moment.

Aren't you painting the picture a little too black here?

After all, the real estate sector is not the only problem facing the Chinese economy, which has recently cooled down considerably - the key words here are scarce raw materials, supply bottlenecks, massive power outages, plant and port closures and, most recently, food rationing. A possible wave of bankruptcies triggered by Evergrande will further slow Chinese growth. At the same time, we see high levels of government, corporate and private debt - China's debt-to-GDP ratio is already 230 percent of annual economic output. If supply chains come under further pressure or even break, this will have a direct impact on the USA and Europe as well.

The problem of supply chains and supply bottlenecks is currently the subject of much discussion. What is Evergrande's significance in this context?

More than two-thirds of Evergrande's debt, we believe, is ultimately owed by other distressed real estate developers and companies within the supply chain. A bankruptcy of Evergrande could cause the insolvency of its direct and indirect suppliers. Most of these are small and medium-sized companies that rely on large customers, not only for their business, but also for access to financing ...

... that Evergrande provides to these companies?

Yes, Evergrande often grants them this in the form of loans. These financial risks are further complicated by the particular nature of the supply chains. One key feature is non-substitutability. Unlike in the financial sector, where companies can easily switch to other products, there are no easy substitutes in a complex supply chain, especially in the short term. So, in all likelihood, a collapse of the construction company will result in a large group of suppliers not only losing their business, but also facing immediate financial hardship, which could lead to a chain of bankruptcies.

Do you believe that Evergrande can succeed in defusing its precarious situation by selling assets abroad and, with Beijing's help, contain what is arguably an even bigger fire in China itself?

I think S&P Global Ratings has already summed it up well in one of their reports. A government bailout would undermine the campaign for greater financial discipline in the real estate sector that the government has just launched. And even in the event that China did step in, it would have no impact on foreign investors because Evergrande is officially registered in the Cayman Islands. According to the May 14 Law on "Mutual Recognition and Assistance in Insolvency Proceedings," the Chinese government would not pay for foreign investors' debts in such a case.

The DMSA, for which you work as a consultant, defines its goal as follows: "To create more transparency for consumers when choosing products, investments and services." Those should only be Evergrande investors in exceptional cases. So why this alarmist tone of the study, is DMSA itself invested in Evergrande?

In our view, the dangers posed by the Chinese real estate sector, not only to China, are criminally underestimated. And yes, we are invested ourselves with a comparatively small amount of $50,000 in bonds of Evergrande. For us, this is not a speculative investment, but a means to an end. If Evergrande fails to service the next overdue interest payments on additional bonds by the Nov. 11 deadline, we as creditors will file a bankruptcy petition against the company. This is not trivial, very costly, but it is possible in principle.

Much weightier investors could have done that long ago. Do you really believe that the - if I may say so - insignificant creditor DMSA from Germany can initiate insolvency proceedings against the real estate giant Evergrande?

For us, it's about principle and transparency. In our view, large companies should not simply accumulate vast amounts of debt and then fail to repay it the next moment. Evergrande and Citibank as paying agent are also behaving in a completely non-transparent manner in this process. With the purchase of the bond and a possible bankruptcy filing, we want to publicly provide clarity as to whether Evergrande will still be able to service its bonds in full in the future or is now bankrupt. We are in a fairly comfortable position here, because the other investors have a lot at stake. If Evergrande files for bankruptcy, they will lose more than these interest payments. That's why I think they're holding still. There are also market rumors that some investors and banks are deliberately not informing about the default of the interest payment in order to gain time to sell larger holdings of Evergrande bonds and shares to unknowing investors via derivatives.

German source: https://www.manager-magazin.de/fina...treten-a-411d07bc-261d-4aad-95d2-46306487e4a7
Click to expand...

Its humorous that this analysts thinks, lawyering up, works in China.

rnish · Nov 5, 2021

Interesting development. My domestic pot stocks jumped ~10% this afternoon. I was wondering what was up. It turns out a red party senator from SC has introduced a bill that federally decriminalizes weed. It has elements e.g., leaving the mechanics in the hands of the states, that may make it ““easier”” (<—-note the double quotes), to pass vs the blue party bill which has languished.

Caboose117 · Nov 5, 2021

Iwilltaco said: ↑

Lol. I don’t know why you sold so early when Nov 6 is tomorrow
Click to expand...

Cause I’m in here

TreeFortRichard · Nov 5, 2021

Caboose117 said: ↑

Okay lucid
It would be real cool if you’d fuck off
Sold at 37.37 and now she’s cruising for 42….

super rude
Click to expand...

I bought REAL HIGH the first time around and then 2x down at $20 to even out @$40/share...I'm finally green.

Iwilltaco · Nov 5, 2021

Caboose117 said: ↑

Cause I’m in here
Click to expand...

Oh yes. Well, congratulations. You get the Oops I left profits on the table token
This allows you to freely laugh at the rest of us. Did you see the NVDA calls @theesotericone sold early? worthy of your laughter.

TreeFortRichard · Nov 5, 2021

kairo[OP] said: ↑

Credit analyst on real estate giant

"Evergrande bankruptcy has already factually occurred"

Can stumbling real estate giant Evergrande still pay its debts? Credit analyst Marco Metzler doesn't think so: He is convinced Evergrande has long been bankrupt - and is challenging the group.

The interview was conducted by Lutz Reiche

05.11.2021, 2.37 p.m.

How big a threat does China's teetering real estate developer Evergrande pose to the global economy? International banks and private investors have lent the group around $23.7 billion - which they want interest on and repaid. So if Evergrande collapses, the corporation will take others with it. Recently, media such as the "New York Times" have been reporting warning signs, but experienced credit analyst Marco Metzler disagrees.

manager magazin: Mr. Metzler, in your latest analysis, you basically claim that Evergrande has long been bankrupt. What makes you say that?

Marco Metzler: The fact is that Evergrande and Citibank, as trustee and paying agent for the interest payments, have not yet officially confirmed a single payment of the interest that has been overdue for more than 30 days. The source referred to by the "New York Times" and other media is a single, allegedly anonymous creditor who is said to have told the media a few hours before the deadline that he had received the interest payment.

What do you conclude from this?

The fact that there is no confirmation of receipt of payment from any official source and that the sources are being treated in such a non-transparent manner raises concerns. There remain considerable doubts as to whether money has really flowed, and if at all, possibly only to individual creditors of the offshore bond. Here Evergrande is apparently repeating the same game as it did on October 23.

What do you mean by that?

Evergrande and Citibank have not officially confirmed any alleged interest payments of $83 million, even at this time. We have asked numerous investors known to us, they could not confirm any receipt of payment. In our view, this obviously means that the Evergrande bankruptcy has already effectively occurred. This also means that all other 22 bonds issued are considered to be in default under the cross-default principle. This is how it is regulated in the bond terms and conditions. This means that bruised investors can now file for insolvency.

The fact is, so far Evergrande has not been declared insolvent. So how much is at stake for foreign investors?

In fact, according to official figures, Evergrande owes 90 percent of its loans and payments to Chinese creditors. But that by no means makes the case a purely Chinese problem. According to our latest information, international investors alone have put about $23.7 billion into 23 bonds and three large loans. Analysts at Fitch expect Evergrande to be liquidated in the event of bankruptcy. Creditors are unlikely to be paid much more than 5 percent of their claims then. In other words: International investors would then have to write off around $22.5 billion in the event of Evergrande's insolvency.

22.5 billion dollars - distributed among hundreds of foreign creditors - that sounds manageable and not like an imminent "meltdown of the global financial system," as you write in your study.

Focusing only on Evergrande and these creditors, the risk may seem manageable. But if one follows the calculations of the renowned Chinese business magazine "Caixin", Evergrande will have to find a total of around 123 billion dollars for interest and repayments within the next twelve months. In total, the foreign loans of international investors in China amount to 586 billion dollars, of which around 30 billion dollars have already defaulted in 2020. If the Chinese state does not step in to cover this, we must already consider Evergrande's bankruptcy a certainty. Moreover, we must not look at Evergrande in isolation: The completely overheated real estate sector accounts for up to 30 percent of China's economic output. Any major bankruptcy could drag down other Chinese real estate companies, banks and insurers with it.

With what consequences for other countries?

Probably with considerable consequences. According to Goldman Sachs, the foreign debts of Chinese real estate developers alone amount to around 197 billion U.S. dollars. The major international bank HSBC, for example, reports loans of $19.6 billion for the third quarter that it extended exclusively to Chinese real estate groups. In total, HSBC has extended $196 billion in credit to Chinese companies in all sorts of industries. In addition: International banks with strong Asian operations sometimes lend to wealthy Chinese, which in turn are backed by Chinese debt instruments. These loans could then also default. However, this aspect may not be seen at all at the moment.

Aren't you painting the picture a little too black here?

After all, the real estate sector is not the only problem facing the Chinese economy, which has recently cooled down considerably - the key words here are scarce raw materials, supply bottlenecks, massive power outages, plant and port closures and, most recently, food rationing. A possible wave of bankruptcies triggered by Evergrande will further slow Chinese growth. At the same time, we see high levels of government, corporate and private debt - China's debt-to-GDP ratio is already 230 percent of annual economic output. If supply chains come under further pressure or even break, this will have a direct impact on the USA and Europe as well.

The problem of supply chains and supply bottlenecks is currently the subject of much discussion. What is Evergrande's significance in this context?

More than two-thirds of Evergrande's debt, we believe, is ultimately owed by other distressed real estate developers and companies within the supply chain. A bankruptcy of Evergrande could cause the insolvency of its direct and indirect suppliers. Most of these are small and medium-sized companies that rely on large customers, not only for their business, but also for access to financing ...

... that Evergrande provides to these companies?

Yes, Evergrande often grants them this in the form of loans. These financial risks are further complicated by the particular nature of the supply chains. One key feature is non-substitutability. Unlike in the financial sector, where companies can easily switch to other products, there are no easy substitutes in a complex supply chain, especially in the short term. So, in all likelihood, a collapse of the construction company will result in a large group of suppliers not only losing their business, but also facing immediate financial hardship, which could lead to a chain of bankruptcies.

Do you believe that Evergrande can succeed in defusing its precarious situation by selling assets abroad and, with Beijing's help, contain what is arguably an even bigger fire in China itself?

I think S&P Global Ratings has already summed it up well in one of their reports. A government bailout would undermine the campaign for greater financial discipline in the real estate sector that the government has just launched. And even in the event that China did step in, it would have no impact on foreign investors because Evergrande is officially registered in the Cayman Islands. According to the May 14 Law on "Mutual Recognition and Assistance in Insolvency Proceedings," the Chinese government would not pay for foreign investors' debts in such a case.

The DMSA, for which you work as a consultant, defines its goal as follows: "To create more transparency for consumers when choosing products, investments and services." Those should only be Evergrande investors in exceptional cases. So why this alarmist tone of the study, is DMSA itself invested in Evergrande?

In our view, the dangers posed by the Chinese real estate sector, not only to China, are criminally underestimated. And yes, we are invested ourselves with a comparatively small amount of $50,000 in bonds of Evergrande. For us, this is not a speculative investment, but a means to an end. If Evergrande fails to service the next overdue interest payments on additional bonds by the Nov. 11 deadline, we as creditors will file a bankruptcy petition against the company. This is not trivial, very costly, but it is possible in principle.

Much weightier investors could have done that long ago. Do you really believe that the - if I may say so - insignificant creditor DMSA from Germany can initiate insolvency proceedings against the real estate giant Evergrande?

For us, it's about principle and transparency. In our view, large companies should not simply accumulate vast amounts of debt and then fail to repay it the next moment. Evergrande and Citibank as paying agent are also behaving in a completely non-transparent manner in this process. With the purchase of the bond and a possible bankruptcy filing, we want to publicly provide clarity as to whether Evergrande will still be able to service its bonds in full in the future or is now bankrupt. We are in a fairly comfortable position here, because the other investors have a lot at stake. If Evergrande files for bankruptcy, they will lose more than these interest payments. That's why I think they're holding still. There are also market rumors that some investors and banks are deliberately not informing about the default of the interest payment in order to gain time to sell larger holdings of Evergrande bonds and shares to unknowing investors via derivatives.

German source: https://www.manager-magazin.de/fina...treten-a-411d07bc-261d-4aad-95d2-46306487e4a7
Click to expand...

The irony should not be lost on us that the country that buys our debt that allows us to keep printing money and continually increasing the coffers of the banks is going to severely damage some of those same banks when the shit hits the fan...So in the end does it all cyclically balance out?

Maybe the debt is transitory....in that it moves from one to the next...never settling anywhere and never being paid off.

TreeFortRichard · Nov 5, 2021

I was watching a home reno show and they were all hoity-toity about installing a Chippendale railing on their stairs. It was apparently used at Monticello. As I watched them carefully assemble the inner frame of the rails I noticed they construct a fairly exact replica of a specific symbol from a mid 20th century European assertive group...

kairo · Nov 5, 2021

TreeFortRichard said: ↑

The irony should not be lost on us that the country that buys our debt that allows us to keep printing money and continually increasing the coffers of the banks is going to severely damage some of those same banks when the shit hits the fan...So in the end does it all cyclically balance out?

Maybe the debt is transitory....in that it moves from one to the next...never settling anywhere and never being paid off.
Click to expand...

Fiat currency is literally a ponzi scheme. It ONLY works if you keep introducing more and more into the system.

kairo · Nov 5, 2021

TreeFortRichard said: ↑

specific symbol from a mid 20th century European assertive group...
Click to expand...

That's probably the most non-confrontational way that specific group has ever been referenced lol

TreeFortRichard · Nov 5, 2021

Draftkings let me down today...

98tacoma27 · Nov 5, 2021

TreeFortRichard said: ↑

I was watching a home reno show and they were all hoity-toity about installing a Chippendale railing on their stairs. It was apparently used at Monticello. As I watched them carefully assemble the inner frame of the rails I noticed they construct a fairly exact replica of a specific symbol from a mid 20th century European assertive group...

Click to expand...

Yes, damn those Hindus to heck anyway. By Krishna!

TreeFortRichard · Nov 5, 2021

98tacoma27 said: ↑

Yes, damn those Hindus to heck anyway. By Krishna!
Click to expand...

It's all about perspective...

rnish · Nov 5, 2021

kairo[OP] said: ↑

That's probably the most non-confrontational way that specific group has ever been referenced lol
Click to expand...

Championed by a dog lover.

kairo · Nov 5, 2021

rnish said: ↑

Championed by a dog lover.
Click to expand...

Dog lover AND aspiring artist.

Fohu · Nov 5, 2021

My biggest regret in life is selling my nvda 205 call two weeks ago.

Caboose117 · Nov 5, 2021

TreeFortRichard said: ↑

I bought REAL HIGH the first time around and then 2x down at $20 to even out @$40/share...I'm finally green.
Click to expand...

I had a 18$ average on 60 shares

rnish · Nov 5, 2021

Fohu said: ↑

My biggest regret in life is selling my nvda 205 call two weeks ago.
Click to expand...

You have led a charmed life.

98tacoma27 · Nov 5, 2021

Rivian raised their expected IPO pricing to $72-$74 per share.

Iwilltaco · Nov 5, 2021

98tacoma27 said: ↑

Rivian raised their expected IPO pricing to $72-$74 per share.
Click to expand...

Shocked

Iwilltaco · Nov 5, 2021

Fohu said: ↑

My biggest regret in life is selling my nvda 205 call two weeks ago.
Click to expand...

I do more regrettable things weekly, lol

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Hmm, new thread title?

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Hmm, new thread title?

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#50146 TreeFortRichard Barcelona Red is the best red...

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#50148 kairo [OP] >_>

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#50154 kairo [OP] >_>

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TreeFortRichard Barcelona Red is the best red...

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TreeFortRichard Barcelona Red is the best red...

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kairo [OP] >_>

#50150
TreeFortRichard Barcelona Red is the best red...

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TreeFortRichard Barcelona Red is the best red...

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