By Stan Szymanski
Today, after months of non-payment of principle and interest on its offshore debt, the common stock of China Evergrande Group stopped trading in Hong Kong.
According to Bloomberg Quint …’The company gave no reason for the trading suspension.’…Could it be because the company is no longer viable, at least as it refers to debt and equity of Evergrande that trades ‘offshore’ (not mainland China)? In a Newsweek article today Newsweek communicated …’Evergrande said trading in the company's shares was halted pending the release of "inside information." The company did not elaborate.’…
In the same Bloomberg Quint article it shares that year over year sales of Evergrande in December were down 99% year over year while other Chinese Real Estate Developers were overall …’with weighted average for 31 developers down 26% from a year earlier’…
It must be pretty tough to meet your obligations when sales are down 99% year over year-don’t you think?
The most incredulous news coming out about Evergrande today (via Bloomberg Quint) was that …’The government of Danzhou, a prefecture-level city in the southern Chinese province of Hainan, has asked Evergrande to tear down 39 illegal buildings in ten days, Cailian reported on Sunday, citing a document from the local government.
The report cited the document, which was dated Dec. 30, as saying that the Danzhou government said an illegally obtained permit for the buildings had been revoked so the buildings need to be dismantled.’…
So we learn on the same day that Evergrande’s common stock stops trading in Hong Kong and that Evergrande’s year over year sales were down 99% that a local government ‘discovery’ of an ‘illegal permit’ is justification for the tearing down of 39 buildings that Evergrande built in the next 10 days?!!!
As we have reported many writings over the last 3 months was that Evergrande was going bankrupt and did meet the typical western standards for bankruptcy. On December 16, 2021 it was reported that Evergrande was now considered ‘SD’ (Selective Default) by Standand and Poor’s (S&P Labels Evergrande Defaulter; Shimao Cut: Evergrande Update). In a typical western bankruptcy, a company that has been put into receivership could only dispense of property for the benefit of who the company is in debt to first and then the equity holders if anything is left over. Apparently, Evergrande is a special snowflake. Evergrande may be in ‘SD’ but as I wrote about in ‘Evergrande Downgraded; Yet Not In Liquidation-Why Have They Sold Assets Before Going Into Receivership?’ I quoted Dr. Marco Metzler when he said …’Fitch's definition of an "RD" rating equals a non-payment of principal. The company has suffered a so called unfunded default on a material financial obligation, but has not yet entered bankruptcy, administration, receivership, liquidation or other formal resolution proceedings, and has not otherwise ceased operations’…So this means that Evergrande is bankrupt but they are under no compulsion to make anything right with the offshore bond holders.
So the news that Evergrande will be ‘ordered’ to tear down 39 buildings is a temper tantrum by Evergrande because if they would act like a responsible entity in the world markets by selling these same 39 buildings and setting the proceeds aside for the offshore bondholders that would be an honorable action.
But that is not what is going to happen, apparently. They are following a ‘scorched earth’ policy by essentially saying ‘We are going to put it in your face that we are not going to pay you and you will watch the assets that we could use to pay you vaporize in a controlled demolition’.
This is war against the west. The offshore bondholders are not getting paid and if the common stock that has now stopped trading the equity holders will wait years before they can hope to get anything, if anything at all is left for the junior lien holders.
Isaiah 3:12 (KJV) states …’As for my people, children are their oppressors, and women rule over them. O my people, they which lead thee cause thee to err, and destroy the way of thy paths’… Do the people who supposedly run Evergrande act like adults or do they act like children? The answer, of course, is children. And they indeed are oppressing all the western investors. Also there are western leaders who have led their people into the ditch by encouraging the west to trust their money to these same children.
Will the leaders of America put appropriate pressure on China and Evergrande to do the right thing? We know that certain leaders in our country are comprised…’O my people, they which lead thee cause thee to err, and destroy the way of thy paths’…So I really do not think that we can depend on these same principles to hold the ‘children’ accountable. Evergrande are acting like rich, spoiled brats who are walking all over the west because they can. There is no honor with Evergrande; there is no protection for the offshore bond and equity holders.
Only a Holy God who is petitioned by His people can make things right at this point; who has the guts to call on Him?
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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.
