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China's central bank accuses real estate giant Evergrande of
"mismanagement and breakneck expansion"
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Investors do not really want to believe whether this is an "isolated case" in China's real estate industry
Photo: via www.imago-images.de / imago images / Kyodo News
State emissaries from Beijing have already moved into the executive suite of Evergrande, which is in debt with 300 billion dollars - probably to prevent the worst. An uncontrolled bankruptcy of the real estate giant could trigger a conflagration on the Chinese real estate market - Beijing wants to prevent this by restructuring the company's debts in good time. The former Fitch ratings analyst Marco Metzler warned weeks ago in an interview with manager magazin that Evergrande would default. He has announced that he will file for bankruptcy against the Chinese company for the German DMSA and Liechtenstein-based Financial Market Partners Capital Consulting AG (FMPC) as public bondholders.
The bankruptcy petition is prepared, a possible insolvency administrator in the Cayman Islands has now been found.
The Evergrande Holding is registered there.
Metzler stayed five days in George Town, the capital of the archipelago, to settle the last details.
The German Market Screening Agency (DMSA) is now relying on possible comrades-in-arms who join the process before the administrator submits the application to the court.
"To reduce the cost risk", as Metzler explains in an interview with manager magazin.
Even if there are no other investors who are affected by payment defaults, the bankruptcy petition will be filed with the court "in two weeks at the latest," assures the credit analyst.
"The bankruptcy delay has already occurred"
Credit analyst Marco Metzler
Metzler is convinced that the application will be accepted and the insolvency proceedings initiated.
"The bankruptcy delay has already occurred and we have good lawyers with a lot of experience in such proceedings in the Cayman Islands," says Metzler, who is also chairman of the board of directors of the FMPC.
The Luckin Coffee case as a blueprint?
DMSA managing director Michael Ewy sees the bankruptcy proceedings against former Chinese Starbucks challenger Luckin Coffee, who filed for bankruptcy in February of this year, as a possible blueprint for further action at Evergrande. Luckin is also registered in the Cayman Islands. This enables access to the restructuring procedure provided there by law. Luckin's provisional liquidators had announced that a restructuring agreement was in place with bondholders. “There is no reason to believe that Evergrande will not be able to go the same way,” says Metzler.
After two holders of US dollar bonds from Evergrande subsidiary Scenery Journey had not received any interest payments after the 30-day grace period had expired, according to Bloomberg, analysts from the rating agency S&P said that Evergrande's insolvency appeared "inevitable". Evergrande himself officially admitted in a statement to the Hong Kong Stock Exchange - the holding company's home stock exchange - for the first time last Friday that there was no guarantee that the group would have sufficient funds to continue to meet its financial obligations. As a result, the credit watchdog Fitch has now also lowered the rating for Evergrande to "partial default".
According to Metzler, the Group's official statement last Friday and the final default on the interest payment on December 6 for the Evergrande subsidiary's bond represent two default events for all 23 outstanding international bonds of the Evergrande conglomerate. These international bonds have one Face value of $ 23.7 billion.
"Almost all of it will be lost," fears Metzler.
"To save what can be saved"
In view of this assessment, the question arises why DMSA and FMPC, which bought 200 Evergrande bonds for $ 50,000 on November 1 of this year, are taking on another, at least as high cost risk with the intended insolvency proceedings. Other Evergrande creditors, who have significantly more money in the fire, are obviously reluctant to take this step. The request is being made "in order to save what can be saved for the FMPC and other international creditors," says DMSA managing director Ewy.
That may sound altruistic, but it shouldn't be. Because Metzler and his team are "about the principle and about transparency", as he says. Big companies shouldn't just pile up huge amounts of debt and then not pay it back the next moment. At the same time, Clearstream and Citibank, as paying agents for the bonds, would behave "completely non-transparent" in this process, criticized Metzler. An official request from the FMPC to both bodies has not yet been answered.
Background: According to its own information, the DMSA is an independent data service that collects and evaluates information on companies, products and services. She earns her money with market studies. The research house has the same owner as FMPC Consulting AG, the Metzler family. The DMSA works with the FMPC if necessary. The latter, in turn, is a private investment and consulting company based in Liechtenstein. As a single family office, FMPC Consulting AG only invests its own funds from its owner, the Metzler family.
Evergrande has been in a deep crisis for months and is considered the world's most heavily indebted real estate company. More than two-thirds of Evergrande's liabilities are owed by other distressed real estate developers and companies within the supply chain, according to Metzler. A bankruptcy of Evergrande could cause the insolvency of its direct and indirect suppliers and thus unleash the dreaded conflagration.
Many other Chinese real estate companies are also heavily indebted.
Quite a number of them have also warned that they cannot guarantee that their debts will be paid.
According to Goldman Sachs, the foreign debt of Chinese real estate developers alone is around $ 197 billion.
The overheated Chinese real estate sector recently represented up to 30 percent of China's economic output.
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