China Evergrande defaults on its debt. Now what?

[rpannier]

For weeks, global markets have been watching the struggles of China Evergrande, a teetering real estate giant weighed down by $300 billion or more in obligations that just barely seemed able to make its required payments to global investors.

On Thursday, three days after a deadline passed leaving bondholders with nothing but silence from the company, a major credit ratings firm declared that Evergrande was in default. But instead of resolving questions about the fate of the Chinese behemoth, the announcement only deepened them.

The firm, Fitch Ratings, said in its statement that it had placed the Chinese property developer in its “restricted default” category. The designation means Evergrande had formally defaulted but had not yet entered into any kind of bankruptcy filing, liquidation or other process that would stop its operations.

snip

For years, many investors gave money to companies like Evergrande on the basis of this assumption. But more recently, authorities have shown greater willingness to let companies fail in order to rein in China’s unsustainable debt problem.

To emphasize this point, China’s central bank has blamed Evergrande’s “own poor management and reckless expansion” for its problems and said the crisis was limited to Evergrande. Yi Gang, the central bank governor, indicated Thursday that Evergrande would go through something resembling a typical reorganization, suggesting a bailout was not in the cards.

https://www.japantimes.co.jp/news/2021/12/10/business/china-evergrande-default/

[rpannier]

1. also from story

Beijing has been front and center in the aftermath of past corporate disasters. Three years ago, Beijing seized control of Anbang Insurance Group after detaining its chair, who was later sent to prison for fraud. Early last year, local government officials stepped in to seize control of HNA, a transportation and logistics conglomerate saddled with debt from expensive overseas acquisitions. Under their guidance, the troubled company was pushed into administration.

Foreign investors challenge that trend at their peril. The Communist Party controls the local courts and has a history of leaving foreign investors with little or nothing.

Investors could go after assets overseas, but the process could be messy.

[roamer65]

2. In China, if the courts don't fuck you the capital controls will.

Easier to get money into China, than it is to get it out.