Learn some financial knowledge every day, and don't be financially blind
On the morning of 29 January 2024, the High Court of Hong Kong issued a winding-up order against China Evergrande, and the court will take over the winding-up.
Evergrande's debt problem is not only about financial markets, but also directly touches the vital interests of countless ordinary families. Many people are worried about whether they can get back the deposit they handed over to Evergrande.
Today, we are going to talk about this topic, hoping to provide you with some useful information.
Evergrande's debt is divided into three main categories:
1. Financial debt:Including bank loans, trust loans, bonds, wealth management products, etc., accounting for about 60%.
The creditors of this part of the debt are mainly financial institutions and investors, who are very sensitive to Evergrande's repayment ability and credit rating, and in the event of default, they will quickly take legal action to require Evergrande to pay off the debt or provide collateral.
2. **Commercial debt:Including builders, material suppliers, designers, intermediaries, etc., accounting for about 30%.
The creditors of this part of the debt are mainly Evergrande's partners, who have long-term business dealings with Evergrande, have a certain understanding of Evergrande's operating conditions and market prospects, and generally give Evergrande a certain grace period, hoping that Evergrande can tide over the difficulties.
3. Home buyer debt:Including the deposit, down payment, final payment, etc., accounting for about 10%.
The creditors of this part of the debt are mainly Evergrande's customers, who have purchased Evergrande's houses or other products, but have not yet received the physical goods or rights, and are very worried about Evergrande's performance ability and integrity, and once they find signs of default by Evergrande, they will immediately ask for a refund or compensation.
Evergrande's total liabilities are as high as 197 trillion yuan, or about 300 billion U.S. dollars. That's a very large number, equivalent to about 2% of China's GDP, or about 5% of the debt of all publicly traded companies in the world. The scale of Evergrande's debt is unimaginable.
First priority: bankruptcy expenses, including the remuneration of the bankruptcy administrator, the litigation fees of bankruptcy proceedings, property appraisal fees, property custody fees, property realization fees, etc.
Second priority: employees' salaries, medical expenses, alimony, pensions, etc., as well as social insurance premiums, housing provident fund, etc.
Third priority: taxes, including value-added tax, income tax, real estate tax, land use tax, etc.
Fourth priority: ordinary creditor's rights, including financial debts, business debts and home buyers' debts, etc., are distributed proportionally.
According to this order, it can be seen that Evergrande's financial creditors are the most advantageous class of creditors, and they can obtain Evergrande's property in priority over other creditors in the fourth priority. WhileEvergrande's home buyers are the least advantageous class of creditorsThey can only distribute Evergrande's property in the last batch.
The purchase of the fixed metal paid by Evergrande to the buyer's debt is the last creditor of Evergrande. This means that if Evergrande's assets are not enough to repay the debts of the top three ranks, then the buyer's deposit will be at risk of not being recovered.
Even if Evergrande's assets are surplus, they need to be reviewed and distributed by the bankruptcy administrator, and there will be significant discounts and delays.
Therefore, the likelihood of a buyer's deposit** depends on several factors:
1. Evergrande's asset value
Evergrande's assets mainly include land reserves, projects under construction, inventories, equity investments, etc.
The value of these assets is affected by various factors such as market demand, competitors, and policy regulation, and it is difficult to accurately assess them.
At present, Evergrande's asset-liability ratio is as high as 160%, indicating that the value of its assets is much lower than the scale of its debt, and due to Evergrande's credit crisis, the liquidity and discount rate of its assets have also been greatly reduced, making it difficult to realize quickly.
2. Evergrande's debt scale
Evergrande's debt scale includes not only the $300 billion that has been made public, but also implicit debts, guaranteed debts, litigation debts, etc., the specific amount of which is difficult to count and will exceed Evergrande's public debt.
In addition, Evergrande's debt is still rolling, that is, Evergrande needs to continue to borrow new debt to repay old debt, and if it cannot be financed in time, Evergrande's debt pressure will be further intensified.
3. Evergrande's bankruptcy proceedings
Evergrande's bankruptcy proceedings involve multiple jurisdictions, including Chinese mainland, Hong Kong, the United States, etc., each with different bankruptcy laws and practices that require coordination and communication.
In addition, Evergrande's bankruptcy proceedings also involve multiple stakeholders, including creditors, shareholders, employees, customers, **, etc., each of whom has conflicting demands and expectations, and needs to negotiate and compromise.
As a result, Evergrande's bankruptcy proceedings will be very complex and lengthy, bringing uncertainty and risk to buyers' deposits**.
4. Intervention attitude
Evergrande's bankruptcy is not only a commercial issue, but also a social issue, involving social stability, financial security, and people's livelihood protection.
Therefore, there may be certain intervention and guidance for the bankruptcy of Evergrande to prevent the bankruptcy of Evergrande from triggering systemic risks or social unrest.
The intervention attitude will affect the possibility of Evergrande's bankruptcy reorganization, the way of debt liquidation, the protection of the interests of creditors, etc., thereby affecting the possibility of the buyer's deposit**.
At present, Evergrande's asset-liability ratio is as high as 160%, the asset quality is questionable, the bankruptcy procedure is complex, and the attitude of intervention is not clear, so the buyer's deposit is unlikely.
The High Court of Hong Kong liquidated Evergrande