PPCC: Pisitófilos Creditófagos. Otoño 2023

[sudden and sharp]

Del periódico favorito del foro...   




Ayuso a la sucesora de Mónica García: «Nosotros no tenemos una casa de 400m² como su jefa»
https://okdiario.com/madrid/ayuso-sucesora-monica-garcia-nosotros-no-tenemos-casa-400m%c2%b2-como-jefa-12035592
- La presidenta madrileña ha defendido que no se va a poner un sueldo vitalicio como insisten en decir desde la oposición
- Ayuso ha criticado a Manuela Bergerot por esparcir un "bulo" sobre una ley que "no ha comenzado a redactarse"




.

[Derby]

https://www.transicionestructural.net/index.php?topic=2596.msg222474#msg222474
https://www.transicionestructural.net/index.php?topic=2596.msg222481#msg222481

La única salida real (que no equivale siempre a solución en el sentido de curación inmediata o milagrosa, a veces es tratamiento) siempre es ortodoxa, pese a quien pese. Apartarse de la ortodoxia es una distracción que comporta el riesgo (poco aleatorio) de cometer errores fatales y aumentar la severidad/intensidad del dolor.

El problema es que en la que se ha venido a denominar como "era del descontento", la ortodoxia resulta costosísima porque requiere esfuerzo, disciplina, fortaleza mental; y la distracción nos la sirven "gratis".

Antes se solventaba con una guerra (de las de antes), ahora ya no es posible. Necesitamos la destrucción para ponernos a construir/reconstruir. Hay que ser más creativo y más inteligente que eso.

[senslev]

¿Cómo se arregla esto ortodoxamente?

[Derby]

¿Cómo se arregla esto ortodoxamente?

Bajando el precio de los inmuebles. Buscando el reequilibrio.

[sudden and sharp]

Kim Jong-un pide entre lágrimas a las mujeres de Corea del Norte que tengan más hijos
https://www.lavanguardia.com/internacional/20231207/9433171/kim-jong-pide-lagrimas-mujeres-corea-norte-tengan-mas-hijos.html
El líder norcoreano reclama a la población de su país "detener el descenso de la natalidad"

Corea del Sur recurrirá a más inmigrantes para evitar “la extinción”
https://www.lavanguardia.com/internacional/20231207/9432014/corea-sur-recurrira-mas-inmigrantes-evitar-extincion.html
“Aceptar más inmigrantes”, dijo ayer su ministro de Justicia, Han Dong Hoon, “ya no es una opción, sino una necesidad, porque sin ellos el país podría verse abocado a la extinción”. Han defendió así, ante sus correligionarios del Partido del Poder Popular, la creación de una agencia estatal de inmigración, que estaría bajo su ministerio.






 

----------

[senslev]

Eso está claro, pero cómo. Las autoridades parece que no están por la labor.

¿Cómo se arregla esto ortodoxamente?

Bajando el precio de los inmuebles. Buscando el reequilibrio.

[Derby]

https://www.ft.com/content/f1ee18a0-69d6-4243-9a1d-934ec9ae96f2

Chinese property is beyond repair. How can creditors delay its collapse?

Patch up the roof, ignore the foundations, feed the hedgies

In 2022 we were describing China’s property crash as “a slow-motion financial crisis”. In retrospect it wasn’t all that slow-motion. The chart below is from Barclays’ 2024 Credit Outlook:


Markit iBoxx USD Asia ex-Japan China Real Estate High Yield TRI — HY © Bloomberg, Barclays Research

More than half of China’s top developers followed Evergrande into default after Beijing moved in 2020 to restrict new borrowing, unravelling a funding model that was built on dollar-denominated high-yield debt and bankrolled by local government financing vehicles.

Since the beginning of 2020, at least 60 China property issuers with more than $140bn in outstanding dollar bonds have defaulted, Barclays calculates:

Default events, © Bloomberg, Barclays Research

What now? New foundations are needed for the rebuild, paid for with principal haircuts, bond issuance and debt-for-equity swaps. However, “many of the debt plans proposed by developers so far have been intended to buy time, rather than to meaningfully improve their capital structures to more sustainable levels,” says Barclays.

Too many Chinese privately owned developers remain riddled with debt and lack an equity buffer. Off-balance sheet and contingent liabilities are also common.

Liabilities across the sector stood at 87 per cent of assets at the end of June, compared with asset-to-liabilities ratios of 69 per cent for the Chinese state-owned builders and 41 per cent for the Hong Kong peer group, according to Barclays. China’s “red three lines” credit policy caps debt-to-asset ratio at 70 per cent, though it was relaxed in January.

Snapshot of the combined balance sheets of 27 non-performing POE developers (as at end-June 2023) © Barclays Research

With so little equity on the balance sheet, a further 20 per cent decline in the book value of property and plant inventories on average would be enough to cause wipeout, Barclays calculates. (Note that the sample above includes Country Garden and Evergrande, both of which were deep in negative equity at the half-year. The former defaulted in October and the latter might be liquidated next month.)

Measuring assets is another problem. The high contract liabilities seen in the chart above are because developers pre-sell property and flip the cash into the next project. The actual unsold property on their books might therefore be lower than reported, which drags both on potential recovery values in liquidation and continuing cash flow if the business can be saved.

Note also the very high levels of payables, which push bond creditors further back in the queue, and their relative lack of tangible assets. The sector is virtually designed to evaporate on the first signs of bust. Here is the consequence.

What kind of a debt haircut is needed to save a fly-by-night property developer that lacks cash flow, equipment, and property? It’s impossible to say, so “more than one” is a reasonable answer. Averting each short-term liquidity crunch won’t solve a solvency problem but it kicks the can down the road, which is probably the most that can be hoped for right now.

Back to Barclays:

"Stripping out Evergrande, we estimate that an average 30% haircut of the total interest-bearing debts for the other 26 POE developers may be required to: 1) improve EBITDA coverage ratios to more than 1.5x; and 2) lower debt/EBITDA ratios to 8x or below, assuming 6% average interest costs, 15% EBITDA margin, and normalised contracted sales at the 2022 level.

Moreover, if only offshore creditors have to bear the cost of the restructuring (ie, no haircuts on onshore debts), then we estimate the potential debt haircuts would need to increase to around 70% for offshore debts, assuming offshore debt accounts for 50% of interest-bearing debts."

The big additional complication is, well, China. In September, Chinese regulators pushed Evergrande closer to liquidation by blocking a plan to restructure offshore debt with new issuance. Can-kicking exercises by other developers is similarly beholden to Beijing, even when it works, and right now it often doesn’t.

Modern Land completed a restructuring a year ago, then last month asked to amend terms ahead of the year-end due date on its first amortised bond. Powerlong and KWG have both defaulted having agreed term extensions last year, while China South City has asked for grace three times since its 2022 restructuring.

What could go right? Barclays uses as a case study Sunac, a top-three developer whose 2021 sales were equivalent to nearly $85bn. Sunac defaulted in April 2022, beginning a 19-month restructuring process involving $10.2bn of offshore debt from which it exited last month.

Creditors voted overwhelmingly in favour of Sunac swapping debt for a clutch of equity-linked instruments that have delivered to recent buyers a quick profit. Key to the proposal was to give creditors the ability to switch back and forth between equity and debt claims, so they could gain exposure to a Chinese property recovery story as well as an easy exit.

It won’t be long before Sunac needs to kick the can again, however. There were no haircuts for onshore debt, which was approximately three-quarters of the total, so while the debt-for-equity swap nearly halved offshore debt the overall indebtedness barely changed. The refinancing also lacked any injection of fresh capital, so Sunac bought two years at most of breathing space. Everything still depends on a property market recovery.

Can other developers follow the Sunac template? It’s doubtful. The restructuring worked because Sunac had an equity buffer and its majority owner, founder and chair Sun Hongbin, was willing to be diluted. And arguably, in a sector full of Potemkin village architects, Sunac is a relatively high-quality play.

Nevertheless, the post-deal price strength of Sunac equity instruments “may have far-reaching implications for other defaulted issuers looking to work out a restructuring deal”, says Barclays.

It calculates that an investor buying the bonds in the three months before restructuring was signed off in September would be up 11 per cent. Here are Barclays’s numbers:



If other companies can follow Sunac’s example they’re inviting hedge funds into a very obvious trade: buy the bond, vote through the restructuring and slot the equity at the first opportunity. It won’t rescue anyone. It won’t even right-size any balance sheets. It certainly won’t help sell more houses.

But it might just be enough to give the can one more kick.

PS: El comentario de Barclays habla de quitas del 70% a los deudores offshore (extranjeros). Yo lo vi hacer en los años 94 y 95 en Barcelona en promociones de pisos en el Poblenou, el barrio que se regeneró a partir de las Olimpiadas del 92.

[CHOSEN]

¿Cómo se arregla esto ortodoxamente?

Con mas empleo público.
Y retirando el 60% de los inmuebles de los portales web de los que se nutren los índices oficiales del gobierno según el BOE.
Y con leyes feministas y con pensiones superiores al salario medio.
 
Es la magia del capitalismo planificado.
Intentaremos ser China y acabaremos siendo Cuba o Venezuela, pero sin su orgullo.
¿Que mas se puede pedir?
Al menos no hemos muerto de covid gracias a las dos dosis anuales que todos nos hemos puesto.
 ¿No?
 
 

[Cadavre Exquis]

From Unicorns To Zombies: Tech Startups Run Out of Time and Money
Posted by msmash on Thursday December 07, 2023 @09:40AM from the reality-check dept.

After staving off collapse by cutting costs, many young tech companies are out of options, fueling a cash bonfire. From a report:

WeWork raised more than $11 billion in funding as a private company. Olive AI, a health care start-up, gathered $852 million. Convoy, a freight start-up, raised $900 million. And Veev, a home construction start-up, amassed $647 million. In the last six weeks, they all filed for bankruptcy or shut down. They are the most recent failures in a tech start-up collapse that investors say is only beginning. After staving off mass failure by cutting costs over the past two years, many once-promising tech companies are now on the verge of running out of time and money. They face a harsh reality: Investors are no longer interested in promises. Rather, venture capital firms are deciding which young companies are worth saving and urging others to shut down or sell.

It has fueled an astonishing cash bonfire. In August, Hopin, a start-up that raised more than $1.6 billion and was once valued at $7.6 billion, sold its main business for just $15 million. Last month, Zeus Living, a real estate start-up that raised $150 million, said it was shutting down. Plastiq, a financial technology start-up that raised $226 million, went bankrupt in May. In September, Bird, a scooter company that raised $776 million, was delisted from the New York Stock Exchange because of its low stock price. Its $7 million market capitalization is less than the value of the $22 million Miami mansion that its founder, Travis VanderZanden, bought in 2021. "As an industry we should all be braced to hear about a lot more failures," said Jenny Lefcourt, an investor at Freestyle Capital. "The more money people got before the party ended, the longer the hangover."

Getting a full picture of the losses is difficult since private tech companies are not required to disclose when they go out of business or sell. The industry's gloom has also been masked by a boom in companies focused on artificial intelligence, which has attracted hype and funding over the last year. But approximately 3,200 private venture-backed U.S. companies have gone out of business this year, according to data compiled for The New York Times by PitchBook, which tracks start-ups. Those companies had raised $27.2 billion in venture funding. PitchBook said the data was not comprehensive and probably undercounts the total because many companies go out of business quietly. It also excluded many of the largest failures that went public, such as WeWork, or that found buyers, like Hopin.

Saludos.

[Derby]

Dentro del inmobiliario, el mercado de locales y oficinas ha sido donde se ha obtenido dinero con mayor facilidad. No tiene los requerimientos que tiene el sector residencial (de habitabilidad) para su comercialización.

https://www.ft.com/content/13e17879-eb58-46ba-b202-4e77e69d82ee

Commercial property confronts the ‘comedown’ from easy money

As René Benko’s Signa property empire implodes, the rest of the sector faces a reckoning

Behind the glittery facades of London’s Selfridges and New York’s Chrysler Building, Austrian property billionaire René Benko assembled a financial time bomb.

Benko’s Signa Group, which bought stakes in the two trophy assets and amassed a €27bn ($29bn) property portfolio, racked up at least €13bn in debt during the years when the cost of borrowing was next to nothing.

“He gorged himself on cheap financing left, right and centre,” said one European property executive.

The decision to go all-out during the era of cheap money left Signa dangerously exposed to the sharp rise in interest rates this year. JPMorgan estimates at least €4bn of the debt owed by two pivotal Signa subsidiaries is at floating rates. And rising interest rates have hammered commercial property values across the market, reducing the value of the assets used to secure Signa’s loans.

Signa Holding, the central company, filed for administration last week.

The group faces tough questions about its business practices and valuations but its unravelling is the most prominent symptom yet of a painful adjustment to higher interest rates across the multitrillion-dollar global commercial real estate sector.

Property owners prospered in the world of cheap debt that made real estate investment relatively attractive. But that high has led to a predictable reckoning.

“The scale of the cyclical reset in terms of real estate valuations is as big as the early 1990s or the global financial crisis,” said Alex Knapp, chief investment officer for Europe at $100bn global private real estate investor Hines. “This is a big one, if that wasn’t obvious.”

Unrealised losses

With the era of ultra-low interest rates over, property owners — from small private businesses to large public companies — face higher interest bills, falling valuations and in many cases a need for cash to pay down debts.

European property groups have emerged as a focus of trouble. Swedish landlord SBB cut a deal with Brookfield to raise funds and is facing angry bondholders demanding their money back. Germany’s Adler survived a UK court challenge by bondholders this year over its restructuring plan, as it tried to avoid insolvency.

Many property owners are sitting on unrealised losses. Tom Leahy, executive director at MSCI Research, estimated in September that about 50 per cent of London’s commercial real estate assets are now worth less than what they were acquired for. New York fared relatively better, with just a fifth under water, but many office owners there face steep losses.

Owners will do what they can to avoid crystallising those losses. Official valuations tend to lag behind market reality because they rely on evidence of other transactions, and dealmaking has stalled. The value of completed deals is down more than 50 per cent in Europe and the US in the third quarter against a year earlier, according to MSCI.

“Sellers aren’t selling something unless they have to. Buyers aren’t buying something unless it’s really cheap. To take something to investment committee, it needs to feel like a distressed deal,” the European executive said.

Property analysts at Green Street compiled a list of more than €3.3bn worth of UK and European office buildings that had failed to sell in 2023 after being put on the market, including Frankfurt’s Commerzbank Tower, saying the list was probably just “the tip of the aborted sale iceberg”.

What forces reality on the market is when loans come due, or covenants on loans are breached. Owners will try to discreetly cut deals with their lenders or privately sell some assets to raise cash. That process can be slow.

“People talk about a wall of refinancing but it never actually works that way. It will take a period of years for those discussions to work out,” Knapp said.

Refinancing struggles

The financial pain will not fall evenly across the wider property market. For some landlords seeking cash, the proliferation of alternative lenders since 2009 means there are debt funds ready to take up the slack left by the banks.

“In the past 12 months, suddenly, it’s like everybody realised that I don’t have to buy that asset for 100 per cent of the price, I can lend against that asset for 60 per cent. If it all goes wrong, I have priority security,” said Lisa Attenborough, head of debt advisory at Knight Frank. “I now have probably over a hundred credit funds on my books.”

New investors have piled into credit partly because straightforward purchases look tricky, since property values could drop further. Many investors think debt is a safer bet.

“Pricing an asset in a higher-for-longer world is tough. So finding buyers willing to take equity risk is equally tough,” said Max von Hurter, head of European M&A at real estate investment bank Eastdil Secured. “Credit deals are easier — investors can earn a very respectable return without taking the first dollar of exposure.”

But financing is not available for everyone.

Signa faced €1.3bn of loan maturities in 2023 that it struggled to meet despite frantic talks with lenders and prospective new investors.

Assets with decent rental prospects — such as warehouses, residential buildings and the top slice of offices — will find refinancing easier.

The difference is between assets that need to see their value correct, and those whose value is expected to be wiped out.

“We are actually seeing assets becoming stranded with a velocity that we have never seen in the market before,” said Raimondo Amabile, co-chief executive of PGIM’s $210bn real estate business. “No one wants to lend against a stranded asset.”

Amabile said the calculation for owners of potentially stranded offices was “completely different”. “I am not going to throw a penny into this. It is basically a bank [problem],” he said.

Some assets will struggle because they have been loaded down with too much cheap debt that needs to be refinanced, even if they have decent tenant demand and rents.

Even the largest investors have cut their losses on some office buildings, including Brookfield’s decision this year to default on two Los Angeles towers. Office towers in New York have changed hands for less than the value of the land they sit on, as investors look for alternative uses for obsolete buildings.

The storm facing office owners, particularly in North America, combines a sharp drop in demand and the need for significant spending to upgrade outdated buildings, on top of the wider real estate downturn and rise in debt costs. Knapp said it amounted to a “little global financial crisis for secondary offices”.

The storm is also intensifying in Germany. Signa’s troubles will deal another blow to the country’s market, further curtailing banks’ appetite to lend to commercial real estate.

“There is going to be a little bit of a fire sale, but not to the extent that it is going to bring down banks,” said Peter Papadakos, head of European research at Green Street. “Signa is not systemic to the wider real estate market. Where the real shitshow is going to be is specifically in Germany, and in offices.”

Still, lower inflation figures for October and increasing market bets that rates will be cut earlier than previously thought have fortified private hopes among some in the real estate sector that they can ride out the downturn. European real estate stocks have risen almost a quarter since the end of October as investors adjust their expectations.

Real estate veterans point out that the industry functioned for decades with higher rates. The challenge for an asset class that relies heavily on debt is navigating the shift after more than a decade of ultra-cheap borrowing.

“It takes a while for people to come down from the excitement of a low interest rate environment,” said Philip Moore, head of European real estate debt at Ares. “You are seeing the slow dawning of the fact that what we had over the past 10 years with a low interest rate environment was more of a blip than the norm.”

[Saturio]

From Unicorns To Zombies: Tech Startups Run Out of Time and Money
Posted by msmash on Thursday December 07, 2023 @09:40AM from the reality-check dept.

After staving off collapse by cutting costs, many young tech companies are out of options, fueling a cash bonfire. From a report:

WeWork raised more than $11 billion in funding as a private company. Olive AI, a health care start-up, gathered $852 million. Convoy, a freight start-up, raised $900 million. And Veev, a home construction start-up, amassed $647 million. In the last six weeks, they all filed for bankruptcy or shut down. They are the most recent failures in a tech start-up collapse that investors say is only beginning. After staving off mass failure by cutting costs over the past two years, many once-promising tech companies are now on the verge of running out of time and money. They face a harsh reality: Investors are no longer interested in promises. Rather, venture capital firms are deciding which young companies are worth saving and urging others to shut down or sell.

It has fueled an astonishing cash bonfire. In August, Hopin, a start-up that raised more than $1.6 billion and was once valued at $7.6 billion, sold its main business for just $15 million. Last month, Zeus Living, a real estate start-up that raised $150 million, said it was shutting down. Plastiq, a financial technology start-up that raised $226 million, went bankrupt in May. In September, Bird, a scooter company that raised $776 million, was delisted from the New York Stock Exchange because of its low stock price. Its $7 million market capitalization is less than the value of the $22 million Miami mansion that its founder, Travis VanderZanden, bought in 2021. "As an industry we should all be braced to hear about a lot more failures," said Jenny Lefcourt, an investor at Freestyle Capital. "The more money people got before the party ended, the longer the hangover."

Getting a full picture of the losses is difficult since private tech companies are not required to disclose when they go out of business or sell. The industry's gloom has also been masked by a boom in companies focused on artificial intelligence, which has attracted hype and funding over the last year. But approximately 3,200 private venture-backed U.S. companies have gone out of business this year, according to data compiled for The New York Times by PitchBook, which tracks start-ups. Those companies had raised $27.2 billion in venture funding. PitchBook said the data was not comprehensive and probably undercounts the total because many companies go out of business quietly. It also excluded many of the largest failures that went public, such as WeWork, or that found buyers, like Hopin.

Saludos.

Sobre el asunto. Ejemplo.

VC Firm OpenView Collapsed Because Two Senior Leaders Quit, Sources Say

https://www.forbes.com/sites/kenrickcai/2023/12/06/openview-collapse-two-senior-leaders-mackey-craven-ricky-pelletier-quit/?sh=402e992942bd

[Derby]

https://www.breakingviews.com/considered-view/chinas-state-pension-fund-joins-the-national-team/

China’s state pension fund joins the national team

All aboard. Beijing is sparing little effort on forming the “national team” tasked with shoring up China’s sagging equity market. This year it has done everything from encouraging listed firms to buy back shares to cajoling fund managers not to sell their positions. Next up is the country’s top pension fund.

The National Social Security Fund, with $400 billion of assets under management, will be allowed to invest in stock futures and be granted more flexibility to increase its equity investments as part of a wider overhaul of guidelines governing its asset allocation, per new draft rules released on Wednesday by the Ministry of Finance.

Change was overdue. It is the first comprehensive benchmark overhaul since the fund was set up as a strategic reserve in 2000 to combat potential problems arising from an aging population. Its two-decade-old rulebook, as the ministry stated in an open letter, can no longer address new developments in the Chinese financial market.

The exact changes are hard to decipher immediately. For instance, the old document states that the share of “securities investment funds and stock investments” should not exceed 40%. The new draft rules now states that the fund can allocate as much as 40% of its assets in stocks. The picture will become clearer as China seeks market feedback on the proposals until January 5.

Cautious managers won’t jack up stock investment overnight but up to 320 billion yuan, about $45 billion, could flow into Chinese stocks should the pension fund raise its stock portfolio by 10%, per Zheshang Securities, a local brokerage. The combined market capitalisation of the Shanghai and Shenzhen bourses is almost $11 trillion. All help is welcome. The CSI300 Index has lost almost 13% of its value this year.

Beijing is clearly sending a buy signal on Chinese equities. The pension fund appears in the list of the top-10 biggest shareholders in 634 companies listed in Shanghai and Shenzhen by the end of September, according to data from WIND. The fund has only logged a negative annual return three times since its inception – the last one in 2022 when it suffered a 5.1% annual loss. Pensioners in the People’s Republic will hope that the Chinese government is calling the bottom correctly, if this is part of the policy intention.

Context News

China will allow its National Social Security Fund to invest in new areas including stock index futures as part of a wider proposal overhaul of its asset allocation, the Ministry of Finance said in an open letter on Dec. 6. The government is seeking market feedback on the proposals until Jan. 5.

Under the previous rules, the share of “securities investment funds and stock investments” was not to exceed 40%. The new draft rules will allow the fund to allocate as much as 40% of its assets in stocks and up to 30% in equities.

The National Social Security Fund suffered a 5.1% or 138 billion yuan ($19.3 billion) annual loss in 2022. It was the third annual negative return since its inception in 2000 as a strategic reserve fund to mitigate problems arising from the country’s aging population.

[Derby]

Corea del Sur recurrirá a más inmigrantes para evitar “la extinción”
https://www.lavanguardia.com/internacional/20231207/9432014/corea-sur-recurrira-mas-inmigrantes-evitar-extincion.html
“Aceptar más inmigrantes”, dijo ayer su ministro de Justicia, Han Dong Hoon, “ya no es una opción, sino una necesidad, porque sin ellos el país podría verse abocado a la extinción”. Han defendió así, ante sus correligionarios del Partido del Poder Popular, la creación de una agencia estatal de inmigración, que estaría bajo su ministerio.

[Derby]

https://www.cnbc.com/2023/12/07/trump-in-court-for-250-million-ny-fraud-trial-that-threatens-his-real-estate-empire.html

Trump in court for $250 million NY fraud trial that threatens his real estate empire

[Benzino Napaloni]

Corea del Sur recurrirá a más inmigrantes para evitar “la extinción”
https://www.lavanguardia.com/internacional/20231207/9432014/corea-sur-recurrira-mas-inmigrantes-evitar-extincion.html
“Aceptar más inmigrantes”, dijo ayer su ministro de Justicia, Han Dong Hoon, “ya no es una opción, sino una necesidad, porque sin ellos el país podría verse abocado a la extinción”. Han defendió así, ante sus correligionarios del Partido del Poder Popular, la creación de una agencia estatal de inmigración, que estaría bajo su ministerio.

Suerte con eso, el idioma coreano no es fácilmente asimilable.

España aún puede tener algo de tirón por Hispanoamérica, pero tampoco va a ser la panacea. A estas alturas hace ya tiempo que sólo se inmigra para cambiar a mejor.