By Stan Szymanski
On Thursday the worlds’ most in hock (indebted) developer, Evergrande, let its’ interest payment on its dollar denominated bond due March 2022 come and go without the interest payment being made to bond holders. Technically, they are not in default until 30 days past the due date of the payment date of the bond. On the heels of that event, Evergrande has another interest payment due on another dollar denominated bond this coming Wednesday.
Just this past Wednesday CBS News ran a story stating that Evergrande -would- make its interest payment that are due this week. That payment was not made as promised. Companies that know they are circling the drain put out information to keep comforting investors that are worried. They also put out this information to try to keep these same investors from becoming sellers of the wretched security of the potentially bankrupt institution and pushing the price of the security into the dirt.
Although that horse has already left the barn and Evergrande stock and bond prices have already been pummeled, in a CNBC article by Weizhen Tan dated 9/23/21 states that ‘Market sentiment was somewhat soothed when Evergrande assured investors on Wednesday that it would fulfil its interest payment on a mainland-traded, yuan-denominated bond also due Thursday.’ So the company is saying that they -would- pay their yuan denominated interest obligations while letting the dollar denominated bond interest payments ride (for now) through the 30 day grace period.
A Bloomberg Quint (Bloomberg News) article has a slightly different take on the yuan denominated debt service of Evergrande: ‘Evergrande’s onshore property unit said in an exchange filing that an interest payment due Sept. 23 on one of its yuan-denominated bonds “has been resolved via negotiations off the clearing house.” While the comment helped trigger knee-jerk gains in some risky assets, Evergrande didn’t specify how much interest would be paid or when. That fueled speculation among some analysts that the developer struck a deal with local bondholders to postpone the payment without having to label the move a default.’
The Bloomberg Quint article goes on to say…’Chinese companies typically pay interest on local bonds through a clearing house; when they arrange to pay noteholders directly, it’s often because the companies can’t meet their obligations on time, said Li Kai, Beijing-based founding partner of bond fund Shengao Investment.’…
So what you are being told is that this is not above board and the financial operations of these Chinese companies are at best, extremely opaque.
This company, Evergrande, is 5 to 6 times the size of Lehman Brothers when it collapsed in 2008. The network of banks and companies intertwined in the success or failure of Evergrande in China and around the world one could surmise is much larger as well. A collapse of this enterprise could have such an impact on world markets and could start a cascade of financial destruction because of the growth of debt and entwined derivatives since 2008. When this Thursday came and went with no interest payment the clock started a thirty day countdown. Could be a countdown to bankruptcy, market free fall and perhaps war.
The aisles are getting wider at my local Sams Club and Aldi. The shelves are not stacked as high as they used to be. In Sam’s Club yesterday I was limited to just 3 cases of water. The world, it seems, is heading into a time of shortages and austerity and preparation by purchasing provisions seems prudent . The financial markets, it seems is also heading into a time of shortages and austerity. Shortages of truth. Shortages of solvency corporately and at the level of the personal investor. Austerity in sage advice.
Perhaps the consideration of hard assets like precious metals where there is no counter party risk is warranted (there is risk inherent in all assets; this is not financial advice-consult your own advisor). Perhaps the sage advice on this subject from people like Holter/Sinclair, Mike Maloney, or Steve Quayle would be a help to you.
The Clock Is Ticking. I have written and recorded a song of the same name. You can purchase it by searching iTunes for ‘The Clock Is Ticking by Stan Szymanski. You can perform this same search to stream it on Spotify or just listen here before you consider purchase. You can support our disability ministry Encouraging Angels in our time of need as we have lost much income because I refused to take the vax. To read about that and consider a donation click here.
The Clock Is Ticking and things will not be same. Please plan accordingly.
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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.
