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China’s property giant Evergrande files for bankruptcy protection in Manhattan

cnbc.com

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Re: China’s property giant Evergrande files for bankruptcy protection in Manhattan

#121

Post by AnthonyMouse »

lmm wrote: post #78
AnthonyMouse wrote: post #29

Earlier quoted context omitted.

Are they actually underwater or do they just have higher loan payments than rental income? If it's the latter, let them sell some properties or transfer them to the bank in lieu of loan payments.

Who says those properties are worth their book value? This is how a crash happens these days - distressed asset holders forced into fire sales of the assets themselves, lowering asset values and putting more of the holders into distress.

They don't have to be worth book value to be worth more than the outstanding loan principal. This is also why it can make sense to pay the bank in real estate. The bank doesn't need to sell it immediately because they don't need to pay a mortgage so they can just sit on it and collect rental income until they can find a buyer.

Another alternative is for the real estate trust to sell new shares into the market and use the money to pay the bank, or pay the bank in new shares. That dilutes the existing shareholders but doesn't force a fire sale of the properties.

Re: China’s property giant Evergrande files for bankruptcy protection in Manhattan

#122

Post by hackerlight »

AnthonyMouse wrote: post #101
satvikpendem wrote: post #73

Earlier quoted context omitted.

Indeed, or put another way, nuance doesn't exist on the internet. I've seen this time and time again, where one party will blame something on capitalism or government regulation as some blanket statement, without saying which policies they're even talking about. At that point, it's a tribal opinion that was arrived at through emotional means, not logical means.

Better yet, sometimes that is what it is. For example, it's plausible that cost disease is largely a result of government regulation, but it's not a result of a specific government regulation, it's a result of the total number of regulations increasing over time like a ratchet when each one adds another tick to the cost of doing business.

> it's plausible that cost disease is largely a result of government regulation, but it's not a result of a specific government regulation

Yes, but each individual regulation that is contributing to this aggregate cost disease has varying degrees of value. Even if a specific regulation contributes +1 to the overall cost disease, it may also contribute +2 of positive value elsewhere that makes it net worthwhile, all things considered.

So we're back to where we started. Each distinct thing needs to be considered on its own merits without trying to automatically judge it based on what category it belongs to.

Aside from that, I could not agree more with your overall view. It's a good distillation of the broader concept of thinking things through from first principles. I don't want more or less regulations. I want more good regulations, and less bad regulations. In some areas (e.g. carbon emissions), I only want more regulations. In other areas (e.g. housing construction), I only want less regulations. I think these conclusions come from starting with the desired end goal (e.g. less pollution) and working backwards. Many people wrongly start with an ideology (e.g. regulations are good) and work forwards from that.

Re: China’s property giant Evergrande files for bankruptcy protection in Manhattan

#123

Post by throwawayqqq11 »

oblio wrote: post #57
aylmao wrote: post #51

Earlier quoted context omitted.

Not sure why this comment is getting downvoted. I think it's relevant to the discussion, whether people agree with it or not.

> it was all about keeping asians down and dependent. Probably because of this. The US is allied to several prosperous Asian countries.

The US is chasing hegemonial "interests overseas". Every other country, that tries to develop a sovereign position in too many industrial sectors contradicts that. Thats how the US justify their industrial/political espionage on basically all their "allies".

Re: China’s property giant Evergrande files for bankruptcy protection in Manhattan

#124

Post by [deleted] »

blackoil wrote: post #98
bakuninsbart wrote: post #94

Earlier quoted context omitted.

From a quick google Evergrande (officially) has 2.4 trillion Yuan in debt, and 1.7 trillion Yuan in assets. Assets seem to have lost more than 20% of their value since 2019. It is the largest one of the Chinese real estate developers, but there are a couple others that might break through the 1T Yuan mark.

That is 90 billion USD shortfall. Assuming lenders will have to take some haircut the no. is big but not something that will break the economy!! am I missing some nos.?

[deleted]

Re: China’s property giant Evergrande files for bankruptcy protection in Manhattan

#125

Post by anovikov »

ksey3 wrote: post #105
hurril wrote: post #95

Earlier quoted context omitted.

Moral hazard and inflation. If I know that I will be bailed out with a certain probability, then my actual cost of capital is much lower (since I am not expected to pay the entire volume of interest.) For instance: why not make the investors whole again instead by giving them the "printed money" instead of going through the middle-man of propping up these failed giants?

In the US sure, where its blasphemous to slit the throats of the leisure classes for their excesses. In China they made Jack Ma disappear. Through out history when it gets time for the Kings & Queens to waive the debt of the plebs away, cause they have nothing left to pay, the Rentier classes take the haircut. In the US the rentiers have owned the Kings & Queens for a long time. To the point where any American instit…

Well, start with the first 10, then remaining ones will emigrate and simply assign bounty for any head of CCP member based on the rank - until the Party is eliminated. How about that? Don't underestimate the money - it goes the long way.

Re: China’s property giant Evergrande files for bankruptcy protection in Manhattan

#126

Post by dmix »

meowtimemania wrote: post #103

I’m never sure if news about China’s upcoming economic problems is written because such an event is actually coming or if the media writes it just for the clicks.

No one else can be certain either. It's always very difficult to tell whether the numbers coming out of China are real and how "real" certain markets are.

But personally I wouldn't buy into the "China is doomed" narratives that the internet loves to bring up yearly. Reality is usually far more boring and the issues (especially central gov ones) are usually far more deep rooted and survive long term like cockroaches.

Regardless the article links to some major long term worries in China's real estate which account for 30% of their assets. The number of defaults is declining but the housing market is still in a major slump:

https://www.cnbc.com/2023/07/26/china-signals-more-support-f...

Re: China’s property giant Evergrande files for bankruptcy protection in Manhattan

#127

Post by throwawayqqq11 »

throwaway2037 wrote: post #97
throwaway4good wrote: post #80

Earlier quoted context omitted.

1. 13K is technically the point where a country goes from middle to high income. 2. The Chinese economy is still growing more than most countries. 3. The US is clearly engaged in zero/negative sum economic warfare against China at the moment - for example read this article and the quoted views by admistration officials therein: https://www.nytimes.com/2023/07/12/magazine/semiconductor-ch... ‘An Act of War’: Inside Am…

The US is clearly engaged in zero/negative sum economic warfare against China I suggest that you read the history of post war trade relations between US and Japan. It was a bumpy ride! One big difference: General adherence to IP laws (China does whatever they want), plus both are democracies. Related: Do you think China can catch-up to developed world in fab tech? I do not. They are hopelessly behind.

... ehem, taiwan.

Re: China’s property giant Evergrande files for bankruptcy protection in Manhattan

#128

Post by HWR_14 »

throwaway2037 wrote: post #89
w10-1 wrote: post #79

This is really a breathtaking legal situation. Bankruptcy law typically trumps virtually all other laws, with not much to guide the court's discretion. International bankruptcies are even weirder. In this case, US bankruptcy law has the power to intervene in ongoing bankruptcy proceedings in Hong Kong, Cayman's, etc. Bankruptcy law protects debt-holders and the company, but not other stakeholders. As far as I know un…

This is really a breathtaking legal situation. Yeah, not really. They issued USD debt and chose NYC as the legal jurisdiction to make their bond more attractive to overseas buyers. There are probably a myriad of overseas entities involved. It is very unlikely this will spread back to Mainland China. Bankruptcy law typically trumps virtually all other laws, with not much to guide the court's discretion. No, sovereignt…

What CoCo bond write down? Or do you mean those special bonds bank issues that go to zero before any other assets during a run?

Re: China’s property giant Evergrande files for bankruptcy protection in Manhattan

#129

Post by OtherShrezzing »

blackoil wrote: post #98
bakuninsbart wrote: post #94

Earlier quoted context omitted.

From a quick google Evergrande (officially) has 2.4 trillion Yuan in debt, and 1.7 trillion Yuan in assets. Assets seem to have lost more than 20% of their value since 2019. It is the largest one of the Chinese real estate developers, but there are a couple others that might break through the 1T Yuan mark.

That is 90 billion USD shortfall. Assuming lenders will have to take some haircut the no. is big but not something that will break the economy!! am I missing some nos.?

The lenders in the Chinese housing market are mostly Chinese citizens. In modern China, rather than buying a house, you buy a promise of a house, then the house builder builds it for you. The house builders though have these huge debts, and they've been using money from new purchases to construct their backlog of homes.

The $90bn outstanding is $90bn in outstanding housing construction, not just abstract debts to banks which could be written off or bailed out. Citizens will need to continue paying their mortgages on houses that don't (and won't) exist, which will cause some civil disquiet. Construction companies are going to have a shortfall of $90bn worth of work in their pipelines, which will mean mass layoffs. Entire large towns will go unbuilt.

Evergrande isn't the only one in this situation, it looks like a handful of large house-builders also have these uncompleted backlogs being paid for with new orders. The collapse of one might prompt the collapse of the others. As house-buyers become less confident that their house will ever exist, they'll stop buying new stock. When they stop buying new stock, the other house-builders collapse under the burden of their backlog of construction projects.

Re: China’s property giant Evergrande files for bankruptcy protection in Manhattan

#130

Post by ricardo81 »

meowtimemania wrote: post #103

I’m never sure if news about China’s upcoming economic problems is written because such an event is actually coming or if the media writes it just for the clicks.

Agree, it's so hard to tell nowadays and consensus of different media outlets maybe helps.

FWIW on Evergrande, I always find Patrick Boyle's channel educational and insightful. He has a few videos on the topic. https://www.youtube.com/watch?v=wXCpis_Mlwk&list=PLHC72UlhAt...

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