In the past few days, there have been a lot of things happening in the capital market, starting with the unfortunate death of Charlie Munger, Warren Buffett's most powerful "right hand," and this morning there was news of the death of former US Secretary of State Kissinger, who had an extraordinary impact on Sino-US relations.
Both have special significance for China. It was Charlie Munger who persuaded Warren Buffett to invest in BYD, and Charlie Munger was one of the few investment tycoons who were firmly optimistic about China's economy.
A month before his death, Munger still expressed extreme optimism about China on the podcast:
"My view of China is that China's economy has better prospects over the next 20 years than almost any other large economy, and that's one thing. Second, China's leading companies are stronger, better, and much cheaper than the giants of any other place. Therefore, I am willing to take some risk from Chinese companies in my portfolio. ”Kissinger, who is also called an "old friend" by the Chinese, also has an indissoluble bond with China, having set foot on Chinese soil more than 100 times, especially in 1972, when Kissinger accompanied Nixon's visit to China, which brought Sino-US relations back on track, which had fallen to the bottom, and made important contributions to the normalization of Sino-US relations.
A few days ago, Wanda's $600 million debt extension plan was approved, and the deadline for Zhuhai Wanda Commercial Management's listing in Hong Kong was also pushed to 2026, but Wanda has not yet responded positively.
On November 28, Evergrande Property announced that it had formally filed a lawsuit with the Intermediate People's Court of Guangzhou City, Guangdong Province, regarding the 13.4 billion deposit pledge of Evergrande Property being enforced by the bank.
The entanglement between Evergrande Property and Evergrande Group has to start in March 2022, when three Evergrande companies: China Evergrande, Evergrande Automobile, and Evergrande Property were suspended from trading in Hong Kong stocks, on the grounds that a 13.4 billion yuan payment from Evergrande Property was missing.
Later, China Evergrande issued an announcement saying that its subsidiary Evergrande Property found that 13.4 billion yuan of deposits had been enforced by relevant banks when reviewing its financial reports.
The 13.4 billion yuan was first obtained from bank loans through the pledge of deposit receipts, and was transferred to China Evergrande through a third party, which means that Evergrande at that time started the idea of its own brothers because of lack of money.
The pledge of the certificate of deposit refers to the borrower's pledge of the unexpired fixed deposit certificate issued by the lending bank, such as the 13.4 billion yuan of funds this time, when the earliest Evergrande capital chain was about to break, he was desperate to target the 13.4 billion funds of his own Evergrande property.
Compared with the real estate companies that are greatly affected by the policy, the property company's cash flow is sufficient and the profits are stable, and it is one of the few cards that China Evergrande can get its hands on.
Moreover, due to the characteristics of the industry, property companies do not need leverage to continue to operate stably, compared with other industries with negative net assets of Evergrande, property companies can generate more than a billion stable cash profits every year.
So why did Evergrande Property and China Evergrande go to court when they belong to the same boss?
The fact that Evergrande Group owes Evergrande Property 13.4 billion yuan and is not repaid by the creditor is true, but there are actually deeper reasons behind it.
First of all, as a Hong Kong listed company, Evergrande Property needs to explain the situation to the regulator and the public when there are "bad debts" in its own bonds from the perspective of regulatory norms, that is, to give everyone an explanation.
The second most important thing is that Evergrande Property and Evergrande Group have different interests due to the difference in the company's equity structure, and the debts of Evergrande Group belong to the company, not to the individual.
At least half of Evergrande Property's debts are belt-related, because the largest shareholder of Evergrande Property belongs to an offshore company registered in the British Virgin Islands, and the actual controller of this company is the family of Boss Xu, and owns 51% of the equity.
In other words, if the debt of Evergrande Property can be recovered, at least more than half of the funds will flow into the pockets of their familiesClearly looking at the court, the actual essence is still a game of Boss Xu's wealth transfer
The Evergrande Group's extreme desire for cash flow may also extinguish the last "spark of hope" of Evergrande Property, which is said to have received the property fee for 20 years, which undoubtedly leads to the current situation that Evergrande Property has no fees to collect.
Therefore, Evergrande Property's current so-called "sufficient" cash flow may also be just a "return to the past", and Boss Xu's choice to sue Evergrande Property to collect debts at this time is more like making a final effort to "make money" for his family.
What is even more incomprehensible to foreign media is the attitude of Evergrande Property towards the handling of the 13.4 billion missing funds.
If this happens in other countries on the planet, it is likely to be severely punished by the regulatory authorities and eventually dealt with in accordance with legal procedures.
But Evergrande has the ability to handle this matter skillfully and properly, and at the same time announced the dismissal of a total of six executives of real estate and property.
The dismissal at this time is not a "bad thing", so that his executives successfully evaded the punishment of the law and played a subtle "golden cicada shell".
What's even more infuriating is that Boss Xu put his own interests in the shell of "fragrant and sweet" Evergrande Property, but threw the problem of high-risk and cash-flow real estate business to the whole society.
This design fully embodies Evergrande's: ".Profits go into their own pockets, and debts are returned to the state"Corporate values.
If there is still connivance and acquiescence to Evergrande's clumsy tricks, then how many companies in the industry will follow suit, and how many homeless young people in the whole society who have bought "unfinished buildings" can afford to toss again?