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On The Looming Wall Of Chinese Defaults, Restructuring Firm Warns "You Know It's Coming"

OWoN: The ripple effect will rattle Miners, Investors and the Banks who again in pursuit of bonus greed recklessly exposed themselves and Shareholders on loans and derivatives. At some point, this bubble will burst. What then?




On The Looming Wall Of Chinese Defaults, Restructuring Firm Warns "You Know It's Coming"


Zero Hedge
By Tyler Durden
22 November 2014

The news this week of China's largest corporate bankruptcy - Haixin Iron & Steel Group - amid crashing iron ore and steel prices was followed by analysts noting it "will be followed by others," as the major flaw of producers of iron ore, the most traded commodity after oil, is they tend to be "over-bullish." Distressed debt funds are starting to circle in preparation for what they expect to be a bloodbath as Bloomberg reports, bad debts in China are well underestimated because authorities persist in propping up weak companies and bailing out local investors, according to DAC Management, "we've yet to see it because if you look at corporate defaults, they keep getting covered by the government. At some point, they can’t cover every single one." Most worryingly though, as KPMG points out, "when you see restructuring advisers getting hired by SOEs... you know it's coming."

As we noted previously,

“Instead of reorganization efforts conducted by local governments, this is an inevitable trend that China will take more ailing steel mills to the courts to protect creditors,” Xu said by phone from Beijing.

But apart from the entire Steel industry being on the verge of bankruptcy... China is doing great!

“There has to be a restructuring of the Chinese steel industry,” Eder said.

“The iron-ore producers are getting more and more aware that their growth expectations have to be redefined. There are enormous over-capacities and more is coming on stream. This will increase the pressure.”

* * *

And as Bloomberg reports, as far as distressed debt in China - you ain't seen nothing yet!

Bad debts in China are well underestimated because authorities persist in propping up weak companies and bailing out local investors, according to DAC Management LLC.

The Chicago-based asset management and advisory firm, which focuses on distressed credit and special situations in China, says the worst is yet to come, and that means lots of opportunities for the world’s biggest distressed debt traders.

...

“They keep reporting such a low number for so many years, there’s only one way it can go -- up,” DAC founder Philip Groves said in an interview in Hong Kong yesterday. “We’ve yet to see it because if you look at corporate defaults, they keep getting covered by the government. At some point, they can’t cover every single one.”

...

Oaktree Capital Group LLC, the world’s biggest distressed debt investor, joined with China Cinda in November 2013 to tap what it said were “unique opportunities” in the country’s real estate market.

“In China, we see a lot of opportunities out there, especially among Chinese banks,” Hanson Wong, Hong Kong-based chief executive officer of Belos Capital (Asia) Ltd. said in an interview. “They are facing some difficulty right now, they cannot keep extending their loans time and time again.”

...

“When you see restructuring advisers getting hired by state-owned enterprises and Big Four accounting firms helping banks to get rid of distressed assets, you know it’s coming,” he said.

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2 comments :

  1. So China is:
    1. The new world economic powerhouse/leader.
    2. Another failing world economy with multiple bubbles about to pop.
    Not sure how both could be true. So which is it?

    ReplyDelete
  2. I also do see that nazionist countries are extracting gold, iron/ore from African countries where the ebola pandemic is declared...could it be that in order to avoid purchasing from China they are now taking the resources by stealth from African resource rich nations? So, if China and Russia stop trading in Petrodollars, the Petrodollar king decides to not trade in Yuan/Yen or ruble by mining these precious metals themselves at a basement bargain price...>>>this is conjecture, but one can only draw conclusions such as this given that alternative news has exposed the increased mining operations going on in ebola pandemic areas within African nations rich in these same resources...

    It doesn't take a rocket scientist to see the corruption, right in our faces...

    ReplyDelete

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