“Evergrande bankrupt”. German company starts the procedure against the Chinese giant, just as the plenum of the CCP celebrates Xi Jinping
Yellow Evergrande. Just as the crucial is about to conclude sixth plenum of the Chinese Communist Party, the real estate giant oscillates dangerously between the collapse and the relaunch. The German consultancy group Dmsa (Deutsche Marktscreening Agentur) has officially requested the bankruptcy procedure for Evergrande for non-payment of interest even after the thirty-day grace period triggered at the expiry of three offshore bond coupons for a total of just over to 148 million euros. Yet the stock flies to the Hong Kong stock exchange after Bloomberg reports of the payment of “at least two out of three coupons”. Meanwhile, in Zhongnanhai, Xi Jinping awaits the approval of the resolution on history that will further cement his role within the Party, therefore of the government, therefore of the state. With the substantial green light towards his third term which will have to be certified at the 2022 congress.
The chronicle is that of a day on a roller coaster for Evergrande. When it was already late at night in China, Dmsa officially asked for the bankruptcy, considering the company in default. The independent market services company, in a note sent to the press, highlights how the Chinese construction giant has let 30 days pass from the non-payment of two bond issues due at the end of September. “Dmsa itself has invested in these bonds and has not received any interest payments to date. We are now preparing the bankruptcy action and are asking all bondholders to join. “
But Evergrande pays coupons to offshore bondholders at the last minute
Shortly after, however, the rumors of Bloomberg. Evergrande would pay the interest on at least two out of three bonds, in dollars. The offending securities pay an interest rate of 9.5% maturing in 2022, 10% maturing in 2023 and 10.5% maturing in 2024. And the payment would be slightly delayed beyond the term. 30 days of tolerance. Hence the note from the German company, but the Chinese giant could avoid the official default this time too. Also because the Chinese issuer Cailianshe confirmed that several bondholders have received coupon payments.
The indications seem to be these also from the Hong Kong stock exchange, where Evergrande’s stock is soaring today. Clearly it does not mean that everything is resolved, starting with the procedure initiated by Dmsa but ending above all with the approximately 300 billion dollars of debts to repay. Also for this reason, the company continues to proceed in an attempt to sell assets to raise liquidity. The electric vehicles unit will sell 174.83 million new shares, with the aim of expanding financing for the production of new energy vehicles (Nev).
Evergrande, the Chinese government’s plan is to avoid the thunderous collapse and proceed with slow dismantling
In the meantime, however, the main question is what the Chinese government wants to do. The feeling, however, is the same as in the past months and weeks: Beijing will not let Evergrande collapse in a thunderous way with possible consequences on the internal social order. The Wall Street Journal argues, as has been rumored for some time, that the state is, if anything dismantling the “real estate” giant slowly and behind the scenes “ in a sort of “controlled implosion” through the sale of certain assets to Chinese companies and limiting damage to onshore creditors and buyers of homes and apartments in China. It is less of a priority to look to foreign investors, even if yet another last-minute payment seems to show that we are still trying to avoid official default and bankruptcy.
Evergrande? If it survives it will be a much smaller company. Beijing’s attention to public order
The path will be long, also because, as sources close to the matter say, it could take years to dismantle the company, which according to the WSJ could survive “albeit in a much smaller form”. Not surprisingly, in the meantime, the founder Xu Jiayin has stated in recent days that the company’s attempt will be to move from the real estate sector to that of sustainable transport. However, it is unlikely that Xu, the symbol of China “to drink”, will not suffer repercussions in the era of renewed “common prosperity”. Meanwhile, local authorities have been ordered to bring accountants together to review Evergrande’s local finances, speak with other developers to complete unfinished projects, and set up law enforcement teams to monitor any signs of public discontent, after several protests had taken place in front of the Shenzhen office in recent weeks.
In the meantime, the sixth plenum is preparing to announce the results of four days of closed-door meetings with a press conference scheduled for Friday, which will also illustrate the third resolution on the history of the CCP and the People’s Republic.
#China #Evergrande #chaos #plenum #Default #bankruptcy #paid