As you may have heard, China's largest real estate developer, Evergrande Group, is facing a huge debt crisis, with a debt of more than $300 billion, equivalent to 2.2 percent of China's GDP5%。Evergrande's debt problems have sparked panic in global markets, with many fearing it could trigger a financial crisis in China, or even a global one.
However, Evergrande's creditors, that is, those investors who hold Evergrande's bonds, wealth management products, business accounts and house purchase money, are not as tough as you think, they did not demand that Evergrande immediately repay its debts, nor did they ask Evergrande to go bankrupt and liquidate, but agreed to Evergrande's debt restructuring plan, and even accepted the conditions of extension and discount. Why are Evergrande's creditors so cowardly?Shouldn't they take advantage of the Evergrande crisis to try to get their money back?
Evergrande's creditors can be divided into four categories: overseas bondholders, domestic bondholders, Evergrande wealth management product investors, and Evergrande's first-class merchants and home buyers.
According to Evergrande's announcement, as of June 30, 2021, Evergrande's total liabilities were 197 trillion yuan, of which: the debt of overseas bondholders is 191500 million US dollars, or about 123 billion yuan, accounting for 6 percent of total liabilities2%；The debt of domestic bondholders is 671800 million yuan, accounting for 34%；The debt of investors in Evergrande Wealth Management Products is about RMB40 billion, accounting for 2% of total liabilitiesEvergrande's debt to the best of the best and home buyers is about 14 trillion yuan, accounting for 71 percent of total liabilities4%。
From these data, it can be seen that Evergrande's debts are mainly concentrated in the two groups of ** merchants and home buyers, whose claims far exceed those of other creditors and are also the biggest victims of the Evergrande crisis.
Evergrande's creditors know that Evergrande's assets and cash flow are far from enough to repay all debts, and if Evergrande is forced to repay the money immediately, Evergrande is likely to declare bankruptcy, and then they may not get a penny back, or only a small part of it.
Evergrande's debt restructuring plan was formulated under the supervision and guidance of China**, which has the willingness and ability to avoid systemic risks caused by Evergrande, maintain social stability and financial order, and protect the legitimate rights and interests of creditors.
Evergrande's debt restructuring plan is a relatively fair and reasonable plan that can protect the interests of creditors to the greatest extent possible, while also giving creditors a certain degree of flexibility and choice, allowing them to decide which plan to accept according to their risk appetite and return expectations.
The impact of Evergrande's creditors on Evergrande's crisis is to alleviate Evergrande's liquidity pressure, win time and space for Evergrande, and give Evergrande the opportunity to improve its financial situation, reduce its debt burden and improve its solvency through measures such as improving assets, speeding up the delivery of buildings, and resuming operations.
The impact also reduces the possibility of systemic risk caused by Evergrande, brings stability and confidence to China's financial market and real estate market, and avoids the chain reaction and negative impact of the Evergrande crisis on other real estate companies, banks, investors, consumers, etc.
Evergrande's creditors have borne certain losses and risks as a consequence of the Evergrande crisis, and they will not be able to recover their principal and interest according to the original plan and conditions, but will have to accept the extension and discount plan, or in exchange for Evergrande's ** and bonds, which means that their rate of return will drop significantly, and they may even face the risk of capital loss and failure to cash out.
Evergrande's creditors are still cowardly after all. They did not launch a fierce attack on Evergrande, as some expected, forcing Evergrande to go bankrupt and liquidate, making Evergrande China's "Lehman moment". They chose to compromise and cooperate, accepted Evergrande's debt restructuring plan, and gave Evergrande and China a chance to breathe, as well as a chance to hope. Evergrande