BERLIN, 25 October 2021 / CNW / – The almost inevitable bankruptcy of Evergrande could even trigger a global financial crisis. This is what the DMSA research report “The Great Reset – Evergrande and the Final Meltdown of the Global Financial System” shows.
In the research report, former Fitch analyst Dr. Marco metzler shows that a bankruptcy of real estate developer Evergrande could trigger a global financial crisis. The promoter, who directly or indirectly employs around four million people, has accumulated around 300 billion dollars indebted that he cannot repay on time.
Metzler, who had already correctly predicted the bankruptcy of Mannheimer Lebensversicherung in 2003, and his two co-authors – Michael ewy and Asia expert Duke dam – demonstrate in detail in the report of the German market filtering agency DMSA that only international investors have implemented US $ 23.67 billion into 23 bonds and three large loans from the ailing real estate developer. Already known institutional investors include well-known addresses such as Fidelity, Blackrock, UBS, Ashmore Group, Prudential, HSBC, Pictet, Vontobel, BNP and Allianz. “At the same time, we are far from knowing all the international investors, but only 148 investors with increased reporting obligations, such as fund companies, who have invested a total of $ 3.44 billion, are known. There could still be negative surprises here, ”says Dr Metzler.
(Note: the list of investors known to date can be taken from the DMSA report available at www.dmsa-agentur.de).
Particularly dangerous: At the end of September, the rating agency Fitch downgraded Evergrande’s rating to C, assigning it a recovery rating of RR6 for the bonds in circulation. In other words, the agency expects investors to get back only zero to ten percent of their invested capital if Evergrande goes bankrupt. “Assuming an average recovery of five percent, international investors should immediately write off about $ 22.5 billion in the event of insolvency, ”calculates the author of the Metzler report. “In a worst-case scenario, some of the international investors that we don’t know today could then also face bankruptcy.
The bankruptcy of Evergrande itself, on the other hand, has probably already taken place. As of Monday morning, German time, no confirmation had been received – neither from Evergrande itself, nor from rating agencies on the ground, affecting bond investors or the banks concerned – that the overdue interest of $ 83.5 million had been paid at the end of last week – the last possible date of the 30-day grace period. So far, there are only unconfirmed press reports that interest has been paid into escrow accounts.
However, it has not yet been received by creditors. This would mean that the company would have gone bankrupt. But even if the interest had been paid this time, it would only be a postponement of the insolvency. Because from now on, it will be in quick succession: The penultimate (also already late) must be paid by November 10.
In addition, Evergrande is expected to make a new US $ 275.8 million in regular coupon payments by December 6. And up to January 27, distributions of another US $ 255.2 million are due. While it is indeed possible to reimburse all the coupons due, a much larger portion of the reimbursement of a two billion dollars the deposit must be refunded by March 23, 2022 later.
According to the respected Chinese business magazine Caixin, Evergrande will have to raise a total of 106 billion euros for interest and repayments within the next twelve months. “In the unlikely event that the Chinese government does not intervene, the collapse of Evergrande must be taken for granted,” said the author of the Metzler report, interpreting these figures.
The bankruptcy of the dangerously faltering developer is only the first step in a financial chain reaction such a bankruptcy is likely to trigger. In their report, Dr Metzler and Co. makes it clear that Evergrande is not the only struggling Chinese real estate developer. Fantasia, Modern Land and Sinic, for example, have also recently been unable to repay their debts. The whole real estate sector, which represents 25 to 30% of economic production in China, is completely overheated. Any bankruptcy can lead to the downfall of other Chinese real estate companies, banks and insurers.
In addition, an Evergrande bankruptcy is likely to significantly slow Chinese economic growth. The economic problems of China will then become even more apparent. Keywords: shortage of energy and raw materials, closures of factories and ports, and over-indebtedness of the state, businesses and individuals. The debt ratio is already 230% of the country’s annual economic output. “This could have devastating consequences for the global economy. Supply chains would be strained even more than they already are today – if they do not break completely,” predicts the author of the report Marco metzler. This, in turn, would inevitably lead to runaway inflation in the United States and Europe.
In the opinion of the report’s authors, a bankruptcy of Evergrande has the potential to lead to extreme disruption of the global financial system – with bankruptcies of players that are still considered strong today. “Triggered by a Chinese financial virus called Evergrande, the world could be facing a ‘big reset’ – the ultimate collapse of the current global financial system,” said Dr. Marco metzler concludes pessimistically.
Please find more information and the research report on www.dmsa-agentur.de
About DMSA Deutsche Markt Screening Agentur GmbH:
DMSA Deutsche Markt Screening Agentur GmbH is an independent data service that collects and evaluates market-relevant information on companies, products and services. DMSA sees itself as an advocate for consumers, private clients and smart investors. The claim: always look at companies and suppliers, products and services through the eyes of customers. Customers are at the center of DMSA’s work. For them, information that is important and relevant to the decision is brought together and presented in the form of market reviews. The aim is to create more transparency for consumers when selecting products, investments and services.
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