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Real estate giant China Evergrande will be liquidated

nytimes.com

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Re: Real estate giant China Evergrande will be liquidated

#151

Post by cm2187 »

loeg wrote: post #72
kayodelycaon wrote: post #52

Earlier quoted context omitted.

CNN has quotes to the contrary. Most of their Chinese assets are owned by Hengda Real Estate Group, which is legally independent. https://www.cnn.com/2024/01/29/business/evergrande-ordered-t...

Interesting. It's unclear how you liquidate the parent company without liquidating subsidiaries (who is going to buy Hengda RE?) and it seems like legally the HK decision should be binding: > Hong Kong and the mainland city of Shenzhen — where Evergrande is based — have a mutual insolvency recognition agreement, but it’s “effectively inoperative” But China basically ignores HK in this.

If the subsidiary is performing (not saying it is the case here), it's unclear to me how you could even force its liquidation. Financially, shits fly upward, not downward. Losses will contaminate the parent company not the child companies (unless the sub has a structural dependency on the parent). You may have to sell the sub at a heavy discount, which means less recovery for your debt holders. But you would get sued by the debt holders or any minority interest of the sub if you tried to liquidate a healthy sub.

Re: Real estate giant China Evergrande will be liquidated

#152

Post by NoboruWataya »

berserk1010 wrote: post #49

A couple of things to note: 1.) Why did it take Evergrande 3 years to liquidate? In western countries, liquidation happens in a few months. One should note that Evergrande did not get that big by itself; obviously it had the support of CCP elites to secure huge bank loans. Therefore, when it went bankrupt, the delay was to allow these elites to pull money/liquidable assets out of Evergrande. Thus after 3 years, Everg…

> Why did it take Evergrande 3 years to liquidate? In western countries, liquidation happens in a few months.

No they don't, not for entities of any significant scale or complexity. Lehman Brothers was still in liquidation as of 2022: https://en.wikipedia.org/wiki/Bankruptcy_of_Lehman_Brothers

Re: Real estate giant China Evergrande will be liquidated

#153

Post by arghwhat »

loeg wrote: post #72
kayodelycaon wrote: post #52

Earlier quoted context omitted.

CNN has quotes to the contrary. Most of their Chinese assets are owned by Hengda Real Estate Group, which is legally independent. https://www.cnn.com/2024/01/29/business/evergrande-ordered-t...

Interesting. It's unclear how you liquidate the parent company without liquidating subsidiaries (who is going to buy Hengda RE?) and it seems like legally the HK decision should be binding: > Hong Kong and the mainland city of Shenzhen — where Evergrande is based — have a mutual insolvency recognition agreement, but it’s “effectively inoperative” But China basically ignores HK in this.

A subsidiary is just an asset like any other. When liquidating company, it's assets are split between creditors to pay back the debt.

Granted, it's very weird to have the parent die. Normally you have subsidiaries to isolate risk, and even if the problem is the parent I imagine you'd cool the books to shift the debt to a sarificial limited liability subsidiary that can go bankrupt so the business can continue.

Re: Real estate giant China Evergrande will be liquidated

#154

Post by cm2187 »

onlyrealcuzzo wrote: post #95
loeg wrote: post #72

Earlier quoted context omitted.

Interesting. It's unclear how you liquidate the parent company without liquidating subsidiaries (who is going to buy Hengda RE?) and it seems like legally the HK decision should be binding: > Hong Kong and the mainland city of Shenzhen — where Evergrande is based — have a mutual insolvency recognition agreement, but it’s “effectively inoperative” But China basically ignores HK in this.

HK is where the foreign debt is. This is freeing the Chinese business of its obligations of $25B in foreign debt. Presumably that makes for a better business. Who knows. Evergrande could easily be worth less than -$25B. No one wants to buy a business worth negative money. But it's definitely worth less negative money now.

If evergrande is the parent company, I don't think a restructuring of its own debt affects the debt of its subs, so the chinese sub would still be liable for the funding it borrowed from the parent unless it is itself restructured.

If you borrow money from a bank and that bank goes bust, you still owe the full balance based on the initially agreed repayment schedule, it is just that your loan is now an asset contributing to the recovery of the bank's own creditors.

Re: Real estate giant China Evergrande will be liquidated

#155

Post by thriftwy »

berserk1010 wrote: post #150
thriftwy wrote: post #133

Earlier quoted context omitted.

I'm not sure why won't the old ones buy units for the young ones. Hey, they can even pool!

They do. it is said that when two people get married, they suck all the savings of the parents from both sides of the family (mostly men's side), as well as the savings of the bride/groom (mostly man), to put down deposit for one house. then it's up to the man of the house to take care of 4 parents, as well as the wife and kids. And you can imagine what happens when the man realizes the house they bought will never b…

I expect both pairs of parents to also have their own homes already. So, inheritance-worthy.

However, knowing asian predisposition to longevity, it may not quite pan out in the end.

Re: Real estate giant China Evergrande will be liquidated

#156

Post by gerdesj »

loeg wrote: post #121
kube-system wrote: post #107

Earlier quoted context omitted.

> Does China just tell Evergrande's creditors "too bad"? In a broad sense, that's how bankruptcy works in the west too. The government has rules for who gets paid first, and everyone else is SOL.

Yeah but in the west it is based on claim seniority rather than like, hose foreign creditors first.

In the UK, its basically HMRC first, then banks/building societies. If there is anything left, everyone else gets a share.

The last one my company dealt with, we got about 10% of our exposure back. So we got £1,000 instead of the £10,000 that was owed. We then got to write that off as a loss.

This monster is in a different league to anything I've dealt with but the principles here would largely be the same but with less transparency and more money wandering off for a chat with shady characters. I suspect that the rules I might follow may be joined by some rather more complicated ones, when the sums involved are large enough and the corporate structures are complicated enough.

Re: Real estate giant China Evergrande will be liquidated

#157

Post by berserk1010 »

thriftwy wrote: post #155
berserk1010 wrote: post #150

Earlier quoted context omitted.

They do. it is said that when two people get married, they suck all the savings of the parents from both sides of the family (mostly men's side), as well as the savings of the bride/groom (mostly man), to put down deposit for one house. then it's up to the man of the house to take care of 4 parents, as well as the wife and kids. And you can imagine what happens when the man realizes the house they bought will never b…

I expect both pairs of parents to also have their own homes already. So, inheritance-worthy. However, knowing asian predisposition to longevity, it may not quite pan out in the end.

The parents are typically living in farming community, with old/run down houses. Which the children dread moving back to, since there is no money nor future.

Re: Real estate giant China Evergrande will be liquidated

#158

Post by kube-system »

loeg wrote: post #141
kube-system wrote: post #125

Earlier quoted context omitted.

No, in the US, claims are paid out based on the type of debt, outlined in the Absolute Priority Rule.

We are talking about the same concept but with different terminology. Not "No, ...".

Maybe we are, but I'm not really sure 'seniority' is a great word to describe it. The term usually implies ranking due to duration. But it's really just a ranking prescribed by law. Often the shortest term lenders who are facilitating the bankruptcy process are first!

Re: Real estate giant China Evergrande will be liquidated

#159

Post by dgellow »

thriftwy wrote: post #135
onlyrealcuzzo wrote: post #86

Earlier quoted context omitted.

The issues were apparent since 2000. The vast majority of Evergrande's outstanding foreign debt is from >2012. BlackRock, HSBC, and UBS poured in about $3B of the $25B in 2021 alone... And, I'm sorry - if you didn't see a risk doing that in 2021 - you're gonna lose all your money sooner or later. In BlackRock's case - it was primarily for 401k-ers for exposure to Chinese bonds. I think the US should've made it illega…

What's wrong with Russian bonds? That land is unlikely to be going away, may contain even more mineral wealth and is climate change resistant.

Aren’t bonds linked to governments, not land? Russia the country can default.

Re: Real estate giant China Evergrande will be liquidated

#160

Post by smfjaw »

10u152 wrote: post #137
Kon-Peki wrote: post #127

Earlier quoted context omitted.

> Who wants to buy a half-finished building abandoned during construction This is actually not a big deal at all if you are following modern high-rise construction techniques.

The problem is can you trust the structure/QA process, is the documentation in place etc. Otherwise it’s a liability nightmare

I somehow think the ccp might look favourably and ignore some liabilities if someone else becomes the new bag holder, you know, saving their RE industry and stuff
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