What Evergrande’s collapse could mean for the global economy

What Evergrande's collapse could mean for the global economy


A Hong Kong court on Monday ordered the liquidation of heavily debt-ridden Chinese property giant Evergrande. The decision comes two years after the company defaulted, creating a financial crisis for other developers and increasing challenges facing the world’s second-largest economy.

The company’s dissolution raises questions about fairness for foreign lenders – which could have wide-ranging implications for foreign businesses operating in China.

How Evergrande fell: the company was once deemed too big to fail, raising debt to expand during a property boom that made the real estate sector a key driver of China’s economic growth. But as the economy slowed, asset sales declined and Chinese regulators began cracking down on excessive leverage and speculation. Evergrande struggled to refinance its debts, which had grown to more than $300 billion, and repeatedly asked for more time to strike a deal with creditors.

The judge hearing Evergrande’s bankruptcy case has now asked for time after two years of talks. Hong Kong-listed shares in Evergrande, which continued to trade despite bankruptcy proceedings, fell more than 20 percent before the trading halt, valuing the developer at just $275 million.

Creditors may have to struggle to get their money back. there is no sign of China’s asset prices will soon recover, or consumers will start buying like before. Sales of new homes fell 6 percent to levels seen last year, 2016.

The proceedings will test protections for foreign investors. Hong Kong judge appoints Western restructuring firm Alvarez & Marsal to liquidate Evergrande. But most of the company’s assets are in mainland China, where liquidators appointed by Hong Kong’s courts have historically not been allowed to take control of assets.

Evergrande’s fate has wide-ranging implications for international businesses in China. Foreign investors have pulled billions of dollars out of the country as President Xi Jinping tightens his grip on the economy even as officials publicly say China is open for business.

“People will be watching closely to see whether creditor rights are being respected,” Dan Anderson, partner and restructuring expert at law firm Freshfields Bruckhaus Deringer, told The Times. “Whether they are respected will have a long-term impact on investment in China.”

  • In other China news: Regulators have imposed limit on short sellingIn an effort to stem stock market declines caused by widespread concerns about the economy.

President Biden vowed to respond to the deadly attack in Jordan. After the White House blamed an Iranian-backed militia for the drone attack that killed three U.S. service members over the weekend, Biden said “we will hold all those responsible accountable.” iran distanced myself from But the deaths from this morning’s attack raise the prospect of a wider regional conflict in the wake of the war in Gaza. Oil prices rose after Biden’s comments, but later retreated.

United Airlines has reportedly begun talks to buy Airbus jets. United CEO Scott Kirby recently expressed the possibility Buying more A321neo aircraft To compensate for the delay of the Boeing aircraft following safety questions about the 737 Max 9, according to Reuters. Last week, Kirby called the grounding of the Max 9 — and the subsequent delay of United’s ordered Max 10 jets — as “that chaff.” broke the camel’s back for us,

X blocks Taylor Swift searches amid flood of explicit deepfake photos of the singer. social network is temporarily stopped showing results Accounts following Swift’s name repeatedly posted photos that experts said were likely generated by artificial intelligence. tech mogul And MPs That said, the incident highlights the need for greater security around technology, especially with fake content posing a potential threat to the upcoming elections.

Interest rates, jobs and earnings are in focus this week. The Fed is set to announce a decision on interest rates on Wednesday; Investors don’t expect any changes, but will be paying attention to what central bank Chairman Jay Powell says about when the rate cuts will happen this year. Nonfarm payrolls data for January is due Friday, with economists expecting lower jobs growth but the unemployment rate to remain steady. Companies reporting this week include Alphabet, Amazon, Apple, Boeing, General Motors, Meta, Microsoft and Starbucks.

As Donald Trump moves closer to the GOP presidential nomination, donors opposing him are beginning to split into two camps.

Some are determined to finance Nikki Haley, his remaining rival. But others are increasingly likely to focus on other races.

A hedge fund mogul wields twice the influence over Haley. “I may have to contribute more now,” cliff asnessthe billionaire co-founder of AQR Management wrote on social network “Bring it Donald.”

Asness, who is co-host of the Haley fund-raiser scheduled for this week, compared his bet to a venture capital investment: “Venture capital is generally considered worthless with a 100% loss and if it’s not So there will be a big payout.”

But Koch-affiliated political networks may focus on the congressional race. At a meeting with donors over the weekend, officials with the super PAC arm of Americans for Prosperity defended supporting Haley over Trump. And the group is still helping him in South Carolina ahead of the state’s primary on Feb. 24.

But it appears the super PAC may shift its focus to helping Republicans win key Senate and House races. A representative of the group said, “If Trump is ultimately the nominee.” told Axios“The threat of a Democrat sweep increases dramatically, making Senate and House strategies even more important.”

One thing to watch out for: Here’s what members of the American Opportunity Alliance, a network of Republican megadonors, did after hearing from the Trump and Haley camps this week.


Flutter, the publicly traded gambling company that owns sports betting site FanDuel, will begin trading on the New York Stock Exchange on Monday. It wants to make the US listing its primary listing, while its existing listing on the London Stock Exchange will become secondary.

It wants to increase its position in the rapidly growing US gambling market. Additionally, Flutter appears to be the latest European company to bet that it can achieve higher valuations by crossing the Atlantic.

US gambling sector reaches a record $60 billion in revenue last yearFollowing a 2018 Supreme Court decision, which effectively allowed states to legalize sports betting.

FanDuel is one of the top companies in the sports-betting business, although its market share was surpasses last year by its rival, DraftKings, whose shares have risen more than 150 percent in the past year.

The US is already Flutter’s largest market by revenue, and the company is expecting growth there. “They are very much a company that is now defined by the American opportunity,” Chris Grove, partner at consulting firm Eilers & Krajcik Gaming, told DealBook. “It makes sense that they would want to list on a US exchange.”

And having a US listing could increase Flutter’s valuation, Given the greater liquidity and larger number of investors playing the US markets. “The company believes DraftKings is getting the kind of valuation it deserves,” Grove said.

It’s a reminder of how the London Stock Exchange has suffered as many companies fled for US exchanges last year due to valuation concerns. (David Schwimmer, head of the London Exchange, said Called that belief a “myth”.,


When the powerful Communications Workers of America union supported Microsoft’s acquisition of Activision, it argued that the deal would benefit “the company’s workers and the broader video game labor market.” Its support added to Microsoft’s broader political efforts to gain approval for the deal, which closed last month.

Weeks later, Activision announced it was laying off 1,900 employees, or about 9 percent of its workforce. Commentators and others called the cuts another example of why unions should not support mergers.

Microsoft strikes unusually worker-friendly deal with CWA Below broad consensus, the tech giant agreed to take a “neutral” approach to efforts to unionize employees. Labor advocates hoped the deal would set a precedent that would carry over from Microsoft.

Union support is in high demand among deal makers. Companies seeking to transact in the Biden era hope to win the support of these groups in favor of a White House that is seen as pro-labor. Harry Katz, a labor relations expert at Cornell, told DealBook that this could give labor groups an opportunity to demand some concessions, as well as an opportunity to expand their membership lists.

But those supports don’t always protect jobs. Last year, the American Economic Liberties Project, a progressive think tank, urged regulators To consider labor as part of the antitrust review, citing deals that unions had supported but were then struck down, including US Airways and American Airlines and Albertsons and Safeway.

“As a general rule unions should not support mergers,” matt stollerAELP’s research director wrote on social media after the layoff announcement at Activision.

Activision’s layoffs didn’t happen in a vacuum, Because many tech companies are cutting their workforce. That can make it difficult to know which layoffs to attribute to the deal and which to broader industry trends.

“The layoffs affecting video game employees across Microsoft today are not an isolated incident,” CWA representative Beth Allen told DealBook. “The neutrality agreement that the CWA negotiated with Microsoft is the best path forward for video game workers anywhere in America to achieve job security and protection from layoffs.”

deal

  • Reddit is said to be weighing valuation at least $5 billion For its planned IPO (Bloomberg)

  • holcimThe Swiss building materials giant plans to close its North American operations, potentially valuing that business at more than $30 billion. (WSJ)

Policy

  • Many of the Biden administration top business executives He is reportedly being ousted due to frustration over progress in achieving White House goals. (Politico)

  • A footnote in a court filing in one of Donald Trump’s fraud cases raises questions about whether the former president’s company owes any debt actually existed, (daily animal)

best among the rest

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