In the past month, the actions of the "thunderstorm" housing companies have been continuous and surprisingly consistent.
First, Evergrande suddenly filed for bankruptcy protection in the United States under Chapter 15 of the United States Code in August, causing a public commotion and issued an announcement to clarify. Then it was Sunac's turn to announce that the overseas debt restructuring plan passed the creditors' meeting and applied for bankruptcy protection in the United States, citing Chapter 15 of the same U.S. law.
Filing for bankruptcy protection is good for the operation of "thunderstorm" housing enterprises, unlike bankruptcy liquidation, the latter is to prevent the enterprise from continuing to operate, once the court rules that it enters the liquidation procedure, it will appoint an administrator to take over the enterprise, and then only do one thing, that is, sell all the property that the enterprise can sell and repay it to various creditors in a certain proportion. The former is to protect the right to operate the enterprise, and after obtaining bankruptcy protection, the creditor cannot enforce the property of the enterprise, and the relevant litigation needs to be stopped.
Of course, Chapter 15 of the United States Code provides for bankruptcy protection only if there is a debt restructuring plan that has been voted on by creditors.
Sunac applied to the New York court for bankruptcy protection after the overseas debt restructuring plan was passed, while Evergrande applied before holding a creditors' meeting, thinking that once it was passed, it would immediately obtain the approval of the New York court.
What is more funny is that the main business, assets and liabilities of the two real estate enterprises are located in China, and they can first go overseas to apply for bankruptcy protection, and they are also resolving overseas debts.
Taking Evergrande as an example, according to the previously released overseas debt restructuring plan, the total amount of various overseas debts of Evergrande as of the end of 20221 was more than 140 billion yuan, which is not worth mentioning in the face of the total domestic trillion-level liabilities.
The main assets of Evergrande Group are in China, and the financial report shows that the total assets as of the end of June 2023 are 1.74 trillion yuan, and 1.74 trillion yuan of assets may need to be frozen for the liabilities of more than 140 billion yuan, do you think it is reasonable?
Of course, mainland law does not necessarily recognize the judgment of the US court, and the creditor should claim the right at its own pace.
Whether it is Evergrande or Sunac's application for bankruptcy in the United States, it seems very legitimate, for the legitimate interests of overseas bondholders, and at the same time, it is also to let the enterprise operate without interference from foreign creditors.
My question is why not file for bankruptcy protection in China since the main assets, debts and business are in China? In the face of many domestic creditors, why not introduce a domestic debt restructuring plan?
The possible reason is that there are many types and quantities of domestic claims, every owner who buys off-plan housing and fails to deliver it in time is a creditor, every supplier who fails to get payment is a creditor, and banks, investment and wealth management products and even tax collectors (the state) are also creditors. However, no matter how complicated it is, it is also a technical problem, and in previous years, the huge HNA Group carried out bankruptcy reorganization in China, wasn't it also completed?
We have to be wary of the capital and actual controllers behind thunderstorm real estate enterprises using overseas debts to transfer personal assets to prepare for "running" in the future.
Before Evergrande and Sunac applied for bankruptcy protection in the United States, the actual controllers of both parties lent a lot of money to the company, and Country Garden's "Xiaoyang" was the same, which on the surface seemed to use personal assets to solve the company's urgent need for cash, but in fact it was an operation to convert equity into debt.
The characteristics of "thunderstorm" housing enterprises are insolvent, even if the net assets of some enterprises are positive, but when they are really liquidated, those illiquid assets cannot be realized at all, in fact, they are still insolvent, which means that shareholders cannot get a penny in the end. Creditors who lend money to the company are different and can get back a little more or less proportionally.
In addition, once the company is "resurrected" with creditor's rights that can be repaid in priority and will not be damaged, the equity value will be severely reduced due to the collapse of the stock price in the early stage.
It should be noted that real estate enterprises listed in Hong Kong are generally registered in the Cayman Islands and theoretically belong to foreign companies. Xu Jiayin, Sun Hongbin and other actual controllers who set up overseas shareholding platforms to indirectly hold the shares of real estate enterprises, and the loans are lent to real estate enterprises registered overseas through the overseas shareholding platform, which is a typical overseas claim, and creditors are eligible to participate in the voting of overseas debt restructuring plans.
The debt restructuring plan is formulated by the real estate enterprise, and the actual controller of the real estate enterprise is ultimately decided; Among the main entities that borrow money are the actual controllers of the housing enterprises who participate in the voting of the plan, isn't this voting on the plan designed by themselves? Do you think the actual controller will make himself suffer?
Although the real estate enterprises have "thundered", there are some high-quality assets in the huge volume, such as the property subsidiaries of Evergrande and Sunac, etc., and their equity has a certain value, which is the heaviest among domestic and foreign creditors. The overseas debts are restructured first, and the good assets are distributed to the overseas creditors, including the actual controller himself, who will protect the interests of the domestic creditors?
It has to be suspected that capital and actual controllers are playing the golden cicada shell, leaving debts at home and transferring profits abroad.
Perhaps seeing the recent surge in capital, regulators no longer tolerate it, and there have been quite a few reactions in the past two weeks.
Two financial companies under Evergrande have accidents. First, Evergrande Life was taken over by the newly established Port Life, which is an insurance company jointly initiated by Shenzhen State-owned Assets Supervision and Administration Commission and other state-owned enterprises, and it is rumored that the former chairman of Evergrande Life was taken away for investigation and has disappeared; Then the Shenzhen police thundered and implemented criminal compulsory measures against several responsible persons of Evergrande Wealth and announced the reporting channels to the public. The control of the two most important financial platforms of Evergrande has deprived Xu Jiayin of the channel to transfer wealth.
Late on the night of September 22, China Evergrande abruptly announced the cancellation of a voting meeting on the arrangement of an agreement related to overseas debt restructuring originally scheduled for September 25-26, citing sales that fell short of expectations. On the evening of September 24, another announcement was issued stating that Evergrande Real Estate was registered by the CSRC, resulting in the inability to issue the new notes mentioned in the restructuring plan.
Evergrande's overseas debt restructuring plan is highly likely to be affected and shelved.
The powerful departments of the state are sending a message to the "thunderstorm" housing enterprises, do not think about transferring wealth abroad, focus resources and energy on disposing of the huge stock of debts in China, be responsible for the buyers who buy the "rotten buildings", be responsible for the suppliers who provide goods and services, be responsible for the banks and other financial institutions that lend to the company, be responsible for the investors who purchase the wealth management products and trusts issued by Evergrande Wealth, be responsible for the various taxes and fees that are not paid, and be responsible for the employees who are still working for Evergrande.
At the same time, the timely action is also a warning to those housing companies on the verge of "thunderstorm" not to dream unrealistically, leaving debts to transfer income is impossible.