HOMER31 USAF RC-135U Combat SENT followed by ZEUS31 USA RC-135W River Joint sw from Black Sea NATO harassment program
HOMER31 USAF RC-135U Combar SENT followed by ZEUS31 USA RC-135W River Joint sw from Black Sea NATO harassment program
China's Evergrande says it will make debt payment
Chinese government remains silent on whether it will intervene in restructuring of Evergrande.
A Chinese real estate developer whose struggle to avoid defaulting on billions of dollars of debt has rattled global markets says it will pay interest due Thursday to bondholders in China but gave no sign of plans to pay on a separate bond abroad.
The Chinese government, meanwhile, added to investor anxiety Wednesday by staying silent about whether it might intervene to restructure Evergrande Group's $310 billion debt. Evergrande's struggle to comply with financial restrictions imposed by regulators to curb rising debt in the Chinese economy has prompted fears a default might cause global shockwaves. Economists say Beijing can prevent a Chinese credit crunch but wants to avoid appearing to arrange a bailout while it tries to force other companies to reduce reliance on debt.
Evergrande appears to be trying to buy time for "an orderly default rather than a shocking implosion" by paying bondholders in China on time while skipping payments abroad, said Vishnu Varathan of Mizuho Bank in a report.
"Averting a default altogether is highly unlikely," Varathan said.
If regulators get involved, they are likely to focus on protecting families that paid for apartments that are yet to be built, economists say. That would cause bigger losses for banks, construction companies and other creditors. Evergrande, which ratings agency S&P Global says is the world's most-indebted real estate developer, said it will make a payment due on a 4 billion yuan ($620 million) bond denominated in Chinese yuan.
A company statement said details were "settled in negotiations outside the market" but gave no indication whether that meant any change in the payment. The bond has a 5.8% interest rate, which would make the normal amount due 232 million yuan ($36 million) for one year. Evergrande did not say if it would make a separate payment of $83 million due Thursday to holders of a U.S. dollar-denominated bond that matures in March.
Evergrande appears to be favoring Chinese creditors in order to negotiate with a circle of friendly banks and other institutions that hold its debt, said Mizuho’s Varathan. He said that "optimizes relief from creditor action" in China.
A default on a bond in China would trigger a cross-default on a bond abroad but missing a payment abroad doesn’t have the same effect with in China, according Varathan. He said it would be harder to renegotiate with a "diverse and dispersed" investor pool abroad.
China's main stock market benchmark, the Shanghai Composite Index, closed 0.4% higher following the announcement. Hong Kong financial markets, which have been jolted by Evergrande's predicament, were closed for a holiday.
https://www.foxbusiness.com/markets/china-evergrande-pay-debt-payment-bondholders
Japan regulator steps in to fix Mizuho's computer flaws
Japan’s banking regulator will take a role in overseeing computer systems at Mizuho Financial Group’s retail banking arm after glitches that exposed failings at the country’s third-largest lender despite $3.6 billion in upgrades.
The Financial Services Agency’s unusual move reflects the deep regulatory concern over deep-rooted technical problems at Mizuho Bank, which the FSA ordered to improve its business. “I can’t think of any other cases where the FSA has become so closely involved in inspections of a (banks’) computer system,” said Brian Waterhouse, senior bank analyst of Windamee Research, who publishes on the Smartkarma platform. “This shows how much the FSA is concerned about the problems,” Waterhouse added.
The FSA will communicate with Mizuho Bank on the running of its computers, officials said at a briefing, although the regulator stopped short of taking on direct management of the bank’s systems after a series of technical meltdowns this year. These included widespread ATM outages, causing frustration among customers and undermining confidence in Mizuho Bank. “Mizuho will submit reports with what’s needed to be done to us and we will point out if changes are needed.” an FSA official told a media briefing, adding that there would be ongoing conversations with the bank. The problems are all the more notable given that Mizuho spent more than $3.6 billion to overhaul its systems in 2019 following two large-scale breakdowns in 2002 and 2011.
A third-party report commissioned by the bank found its corporate culture was to blame for its tech system failures, creating an atmosphere where managers are reluctant to express opinions and unable to respond well to crises. Mizuho said in a statement it took the regulator’s punishment seriously and reassess the need for scheduled system upgrades and updates. “Our top priority is the stable operation of our IT system, and we will do all in our power to ensure upgrades and updates proceed steadily and securely,” it said. “All of our employees will continue to work together towards this goal.”
The regulator’s next actions will depend on the outcome of a report from the bank, which is due by Oct. 29.
https://www.reuters.com/article/japan-banks-mizuho/update-6-japan-regulator-steps-in-to-fix-mizuhos-computer-flaws-idUSL1N2QN2YV
Mizuho is and FRB Primary Dealer.-cap #2
Here Are All Of Evergrande's Debt Payments For The Next Three Years
The euphoria surrounding the Evergrande coupon payment statement, which saw the company make a vague certification that the coming 232 million yuan interest payment on its Sept 23 notes “has been resolved via negotiations off the clearing house” while leaving offshore creditors in the dark, may have sent futures sharply higher but it likely won't last long.
For one thing, the way the payment was structured suggests the amount paid will be haircut which rating agencies will dub a technical default. As Li Kai, partner of bond fund Shengao Investment, explains Chinese companies typically pay interest on local bonds through a clearing house; when they arrange to pay noteholders directly, it’s often because the companies can’t meet their obligations on time. “Usually it will involve extension, payment in installment or a reduction in the coupon,” Li said. “This is one of the ways to avoid defaults by distressed companies.”
Furthermore, while Evergrande's announcement fueled speculation that the developer struck a deal with local bondholders to postpone the payment without having to label the move a default, the reality is that even as of this moment, the company is facing a default on its offshore bonds which have a $83.5 million interest payment due on Sept 23 on the 8.25% bonds due 2022. Incidentally, these same bonds traded down 0.7 cent to 24.5 cents, according to Bloomberg-compiled prices, suggesting that creditors still expect a full default. “Evergrande might have arrived at some kind of standstill with onshore holders,” said Daniel Fan, a credit analyst at Bloomberg Intelligence. “They might have asked them not to act, pending for negotiation for a rescheduling or something of that sort.” But the biggest problem, as represented in the chart below, is that whether it is local or foreign, the company has billions of debt payments due in coming months and years. Just in the next 3 months, the developer owes $669 million in interest through the end of this year, including $83.5 million for the coupon payment due Sept. 23 on the dollar bond. There’s a 30-day grace period before a missed payment on that note would become a default, according to the bond covenants.
The bottom line is that absent a wholesale restructuring with local creditors which will certainly involve impairments - and potentially pressure from Beijing - Evergrande simply does not have the capacity to make payment-by-payment arrangements with its countless creditors, and thus last night's announcement has just delayed the inevitable. As for foreign bondholders, expect to be crammed down to the very bottom of the stock, perhaps even below the equity: after all Xi has to make someone pay.
Incidentally, as we noted last night, "Beijing may have just found a brilliant solution to the Evergrande problem, effectively rescuing the company and averting a systemic crisis all at the same time: it will pay local bondholders and soft nationalize/bailout Evergrande, but will avoid allegations of backsliding on tightening/deleveraging promises and improving "common prosperity" by stuffing foreign creditors." We leave the last word to James Sullivan, head of Asia Pacific equity research at JPMorgan Chase: “Evergrande is still likely to default. This is not a company specific issue, this is a structural issue that will impact the entirety of the Chinese developer space but this will not become systemic.” We agree with the former, but very much disagree with his cheerful assessment on the latter.
https://www.zerohedge.com/markets/here-are-all-evergrandes-debt-payments-next-three-years
seems to habs cleared up
last few posts cycled as usual