Today Forbes reported that Evergrande was downgraded to ‘RD (Restricted Default)’ status.
According to former Fitch analyst Dr. Marco Metzler: …’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. ’…(from Dr. Metzler’s LinkedIn Post dated today December 9, 2021)
So since Evergrande is not yet in receivership, they do not have an apparent obligation to take any action at this point to ameliorate the financial loss of the bond holders. With Evergrande bonds trading in the low 20’s the pain is severe.
What is disturbing is that Evergrande has been selling assets for nebulous purposes that may or may not end up in the hands of the victimized bondholders. On Nov. 26, 2021 the Wall Street Journal reported that the founder and chairman Hui Ka Yan of China Evergrande Group, has sold a large chunk of his shares, raising the equivalent of about $343 million. Further in the article it states: …’The proceeds from Mr. Hui’s sale will be used to fund the developer, a person familiar with the situation said.’… Did that say it would go to pay interest and principle of its past due bonds? No, it did not.
On Nov. 5, 2021 the Wall Street Journal reported …’China Evergrande Group raised more than $50 million last month by selling two of its private jets, according to people familiar with the matter, bringing in much needed cash to help avert a default on its U.S. dollar debt.’…
Do you believe the reports that the ‘much needed cash to help avert a default on its U.S. dollar debt’ was used for that purpose? If that was the case, why didn’t they just put the company into receivership and mete out whatever compensation was available to the bondholders? This business of selling off assets would normally be done by the receiver in charge of the bankruptcy. But Evergrande is raising cash -before- they put themselves into the hands of the court.
What purpose would that serve? I will leave it to your imagination; but regarding Evergrande sales proceeds what purpose does …’be used to fund the developer’…exactly mean when you are already behind a couple hundred million in interest payments?
Encouraging Angels and Dr. Marco Metzler correctly identified the bankrupt state of Evergrande months ago and was even recognized by Greg Hunter at usawatchdog.com for doing so. So identified above is two reports from the WSJ where their reports basically intimate that Evergrande is selling stuff to pay their bills when in fact since September 2021 Evergrande hasn’t made any interest or principle payments when due!
Why has the financial media constantly and broadly stated that over the past almost 4 months that they averted bankruptcy when in fact -no- Evergrande Interest or principle payments were made on their bonds?
This is all manipulation of the narrative. This is meant to keep you, the investor complacent. If you are complacent you are more akin to the frog in the pot who doesn’t know that the fire underneath him is being raised to a level where he is ultimately cooked.
Today’s news of Evergrande being relegated to RD (Restricted Default) status still lets Evergrande operate without a receiver and raise money for undetermined purposes. Only when they must put the company under the yoke of the court will the world begins to see what is really beneath the roof at Evergrande.
I do not think it is going to be pretty.
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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.