Whistling Past The Graveyard-Investors Cheer The Interest Payment Made By Evergrande at the 11th hour-The Veiled Risks And The Deception Of The Orients’ Real Estate Developers
/By Stan Szymanski
Late last week China’s second largest real estate developer made a payment on 83 million dollars of interest with one day to go before it would have been declared bankrupt. Reuters reported today that …’Shares in China Evergrande Group's electric vehicles (EV) unit <0708.HK> rose on Monday as the embattled property developer moved to prioritise the growth of its nascent EV business over its troubled core real estate operations.’…
Evergrande has to come up with another $47.5 million by This Friday or again, risk default. Evergrande has over $330 million due in dollar denominated payments during the coming months of November and December.
Evergrandes’ attempt to sell a 50.1% stake in its Evergrande Property Services arm to smaller rival Hopson Development Holdings collapsed last week. Things do not seem to be going too well in the property market as other Chinese property developers are also defaulting on interest and principle payments like Sinic and Fantasia.
According to Fitch via Nasdaq, …’Fitch ratings agency said that Fantasia Holdings Group 1777.HK, a property developer which has since defaulted, had recently told it "for the first time" that it had $150 million of private bonds that do not appear to have been reported in its financial statements.’…
$150 Million in bonds that do not appear to have been reported in its financial statements? What kind of deception is going on in China with the Real Estate Developers? These guys can’t pay their interest and principle payments and we are just now finding out about -other- securities that they issued?
In a recent Auto Blog article at MSN…’China's central bank highlighted in 2018 that companies including Evergrande might pose systemic risks to the nation's financial system.
The leaked letter last year said Evergrande's liabilities involve more than 128 banks and over 121 non-banking institutions. JPMorgan estimated last week China Minsheng Bank has the highest exposure to Evergrande.’…
So Evergrande has indebtedness to 128 banks and 121 ‘non-banking institutions’. Since most of those debt most likely involve real estate, do you think that those same banks are comforted by the fact that the Chairman of Evergrande is hanging the hopes of the company on its Electric vehicle unit that has yet to even produce a prototype, let alone a car, let alone revenue, let alone profit???
Does Evergrande, like Fantasia, have securities that were not even on its balance sheet? Was this a regular practice among the Chinese Real Estate developers? With relationships with 249 bank and non bank entities are all of Evergrande’s cards truly on the table? 249 entities doing debt business with Evergrande might just be tempted to hedge their bets with derivatives to make sure they got paid. If Evergrande is the counter-party, just how out of control could this situation get?
China’s Central Bank was right to be concerned about the systemic risk to China posed by the real estate developers. What about Evergrande’s risk to the US market? In the MSM article it stated:…’ JPMorgan estimated last week China Minsheng Bank has the highest exposure to Evergrande’…How would JP Morgan know unless they would in a business relationship with Evergrande also (since this was apparently a ‘clandestine’ document)? How much exposure does JP Morgan have? How many other US ‘too big to fail’ banks are vulnerable to the frailty of Evergrande? Do non-bank entities include the governments of the world? Does it include the United States Of America? Through the vast array of mutual funds, pension funds and US markets-does it include you?
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Stan Szymanski (or Encouraging Angels) is not a medical doctor. This is not medical advice. In all matters pertaining to the health and care of a human being consult a medical doctor. This is not legal, financial or personal advice. Consult appropriate professionals in those fields for that type of advice.