China Evergrande Group (formerly: Evergrande Real Estate Group) (3333.HK)

Evergrande: the end of China's property boom | FT Film
https://m.youtube.com/watch?v=dnp_MxXY9qs

Lender Seizes Evergrande's Hong Kong Headquarters
https://www.zerohedge.com/economics/lend...adquarters

https://www.channelnewsasia.com/business...on-3048526

Being forcesold when markets are down is a painful experience. For China Evergrande, its reported book value of a land was marked down by 55%. It gives an estimated market price of land in Hong Kong now (50% discount from reported valuations). If we are to use this as metrics, it will show the true worth of many HK developers and REITs

An apt reminder that a train crash can be much longer than VB expected, worst still enticing more to board the gravy train. Gradually then suddenly.

(Wall Street Journal) -- Shares of embattled Chinese property giant China Evergrande Group crashed 79% on Monday, when they resumed trading after being suspended since March 2022.
The stock was halted months after Evergrande, which has more than $19 billion in offshore borrowings, defaulted on dollar bonds, and as the company struggled to produce audited results.
Evergrande is now working with offshore creditors to wrap up one of the world's largest and most complex debt restructurings, and recently sought U.S. court approval to push ahead.
Late Sunday, Evergrande said its net loss in January to June was 33.01 billion yuan, or about $4.53 billion. Total liabilities as of June stood at the equivalent of more than $326 billion.
Evergrande's default in late 2021, following a government crackdown on leverage in the sector, marked a milestone as China's property boom turned to bust. The sector continues to suffer, with home sales and investment plunging after a small recovery at the start of the year.
The property developer has postponed some investor meetings until September to give investors more time to understand and agree to the terms of the proposed restructuring.

(08-09-2021, 05:16 PM)specuvestor Wrote: Personally I think the backer for Evergrande goes all the way up cause it was not purged even with Foshan, HNA, Wanda etc and it had openly say for years that they even take loans from WMP and had been extremely leveraged

Coincidentally it's woes coincides with the stepping back of Wang Qishan as Vice President without portfolio; which was what an exiled billionaire been claiming

(29-04-2015, 12:04 AM)specuvestor Wrote: Frankly evergrande is a high risk bet. It could easily be another kaisa

Gaudente swam with sharks and emerged victorious but i wouldn't encourage doing this on a consistent basis

Paying out dividends to shareholders, recognizing future revenue, paying high interest to their WMPs....

How and why China Evergrande crashed

Estimates range over how many apartments remain empty. He Keng, a former deputy head of China’s statistics bureau, recently quipped about an estimate that the number of vacant homes was not enough for 3 billion people. “That estimate might be a bit much,” he said in a video published by China News Media. “But 1.4 billion people probably can’t fill them.”

There were clues in the new audit that Evergrande had been treating money it had received for apartments as revenue even though at times it had not yet built those apartments.

Evergrande’s wealth management arm, which had pitched short-term and high-interest products to homebuyers and employees when money was tight, told investors in August that it wouldn’t be able to make payments.

Hui had paid himself and his wife more than US$7 billion in dividends since taking the company public in 2009.

https://www.businesstimes.com.sg/interna...de-crashed

https://www.channelnewsasia.com/business...rt-4081401

Next up is the legal arc of story. Will China honour the liqudation of around RMB$1 trillion in properties in its country. If yes, I wonder who has the deep pockets to absorb the entire amount of unsold properties

(29-01-2024, 05:23 PM)CY09 Wrote: https://www.channelnewsasia.com/business...rt-4081401

Next up is the legal arc of story. Will China honour the liqudation of around RMB$1 trillion in properties in its country. If yes, I wonder who has the deep pockets to absorb the entire amount of unsold properties

hi CY09,

Well, it was always "1 country 2 systems" until it gradually evolved into "1 country 1 system". I guess this is the only time where every affected party hopes that CCP will be following the "1 country 1 system" guideline. 

It is probably too early to paint their entire property portfolio with the same brush. China is huge and the common knowledge is that the real problem are the properties located in the 3rd/4th tier cities. Of course, I haven't studied into Evergrande's portfolio to be able to know the "quality of their portfolio".

But one could imagine that many choice locations will be up for grabs. There are definitely a lot of property investors ready to spend 50cents to buy a dollar worth. Will the remaining undesirable ones eventually get bail-outs from SOEs (with backing from PBOC)?

Also, we must not forget the hierarchy of bankrupt-to-liquidation claims. After disposing assets, the liabilities to be 1st paid are Evergrande's obligations. Ignoring bankruptcy and tax costs, the first and foremost will be the completion of homes and delivery to owners. But in order to complete homes, (existing or new) suppliers will get paid to complete them. Employees will also get priority on their salary arrears and probably continue to get paid as liqudators/new owners focus on the completion of homes.

So as we can see, liquidation actually moves the clogged wheel again. When the wheel is clogged, everyone suffers. When it is unclogged, certain parties as described above start to benefit again. Of course, their benefits are at the expense of other creditors. My wild guess - creditors with secured debt will probably get back pennies to the dollar. Creditors with unsecured debt, other unconventional debt (eg. convertible bonds etc) and equity owners will get zero.

The worry is that the liqudation of China evergrande might not be even enough to cover the loans given by the banks. This is because homes will be bought at discount.

The banking system will have to impair its loans made to china evergrande which weakens the banks and could lead to the collapse of the weaker regional banks. USA faced this problem last year and China might be facing the collapse of its regional banks if China evergrande liqudation does not offer even enough to cover bank loans

(31-01-2024, 12:46 AM)CY09 Wrote: The worry is that the liqudation of China evergrande might not be even enough to cover the loans given by the banks. This is because homes will be bought at discount.

The banking system will have to impair its loans made to china evergrande which weakens the banks and could lead to the collapse of the weaker regional banks. USA faced this problem last year and China might be facing the collapse of its regional banks if China evergrande liqudation does not offer even enough to cover bank loans

With the market pricing the biggest Chinese banks at high single digit dividend yields, I think it is quite obvious that Mr Market does not expect these banks to have insignificant losses from the current property downturn. When you try to earn a profit by assuming risk, there is a chance to lose money. You don't earn the juicy spreads but not assuming any risks, isn't it?

That said, the banking system works on confidence and confidence is eroded 1 bank at a time during bank runs. Since Chinese capital markets opened much later than almost everyone else, they are masters of learning from others. I suppose there are more than enough lessons to learn from with regards to "bank runs and failures".

Finally, if we look at all prior liquidation of huge leveraged entities (eg. Lehman Bros), the entire process will take a long time (5-10years) to complete itself. I think to suspect such liquidation is the start of the end.

China Evergrande is a known case for years. The Chinese banks like others outside of China, classify the loans into 5 tiers and hit it with general and specific provisions. I don't know if the provisions from big 4 state banks and the next tiers are enough, but with the concentration of market shares of large banks in China, one can get a feel of the provision by reading 5 to 10 annual reports.

If the hit really come, I would not mirror the past US banking crisis into China banks. All China needs to do is lock up the banks. It is not unthinkable. China recently demonstrated how to lock up cities, isn't it? Unlike bank run, incurring years of losses won't kill banks easily.