Quote: <<July 17, 2007—In a letter sent to investors, Bear Stearns Asset Management reported that its Bear Stearns High-Grade Structured Credit Fund had lost more than 90% of its value, while the Bear Stearns High-Grade Structured Credit Enhanced Leveraged Fund had lost virtually all of its investor capital. The larger Structured Credit Fund had around $1 billion, while the Enhanced Leveraged Fund, which was less than a year old, had nearly $600 million in investor capital.>>
After the incident, Bear took the bad assets onto their own balance sheet. Shortly thereafter, creditors starting asking hard questions: "What other crap is on your bloated balance sheet?"
That said, the PRC gov't might allow Evergrande to default on their offshore/external/USD debt, but provide a bailout onshore. That seems realistic. During the 2008 GFC, Deutsche had an enormous footprint in the United States (via commercial and investment banking). They got almost nothing from US Fed/Treasury during bailouts. Same for UBS. Why not? They were not American corporations.
I kinda get the impression that they want capital for manufacturing rather than property speculation.
Given how important house prices/construction is for their economy and growth, it's gonna be really interesting to see what they do (will they accept negative GDP growth to increase "common prosperity").
The blow up probably could have been less severe if they smoothed the landing.
My intuition (and the presumption in the U.S.) is that a market position allows a business to dispose of inventory in normal commercial channels more profitably than auctioning it at wholesale in a Chapter 7-style liquidation. Hence first-day motions in U.S. bankruptcy courts.
(Disclaimer: I worked on the Lehman Brothers bankruptcy but did not represent any U.S. or U.K. subsidiaries.)
