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What will Evergrande’s creditors do next?
A Hong Kong court on Monday ordered heavily indebted Chinese real estate giant Evergrande to liquidate. The decision comes two years after the company defaulted on its debts, triggering a financial crisis for other developers and adding to the challenges facing the world’s second-largest economy.
The company’s dissolution has raised questions about its fairness to overseas creditors, which could have far-reaching implications for foreign companies operating in China.
How Evergrande collapsed: The company was once deemed too big to fail and racked up debt to expand during a real estate boom that saw the sector become a key driver of China’s economic growth. But as the economy slowed, real estate sales plummeted, and Chinese regulators began cracking down on excessive leverage and speculation. Evergrande has struggled to refinance its debt, which has ballooned to more than $300 billion, and repeatedly asked for time to finalize an agreement with creditors.
The judge presiding over Evergrande’s bankruptcy case made the decision after two years of deliberations. Evergrande’s Hong Kong-listed shares, which had continued trading despite the bankruptcy proceedings, plummeted more than 20% before the suspension, valuing the developer at just $275 million.
Creditors are likely to have a hard time getting their money back. There are almost no signs of it China’s real estate prices will recover soon, or else consumers will start buying as before. New home sales fell 6% last year, the lowest level since 2016.
The case will test protections for foreign investors. A Hong Kong judge has appointed Western restructuring firm Alvarez & Marsal to liquidate Evergrande. But most of the company’s assets are in mainland China, and liquidators appointed by Hong Kong’s courts have historically not been allowed to manage them.
Evergrande’s fate has far-reaching implications for China’s international business. Even as officials say publicly that China is open for business, foreign investors are pulling billions of dollars out of the country as President Xi Jinping tightens the reins on the economy.
Dan Anderson, a partner and restructuring expert at the law firm Freshfields Bruckhaus Deringer, told the Times: “People will be watching closely to see if creditor rights are being respected.” Ta. “Whether they are respected will have long-term implications for investment in China.”
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In other China news: Regulators put limits on short selling to stem stock price declines due to growing economic concerns.
what’s happening here
President Biden vows to respond to deadly attack in Jordan. “We will hold everyone responsible accountable,” Biden said after the White House blamed Iranian-backed militias for last weekend’s drone attack that killed three U.S. service members. Although Iran distanced itself from the attack this morning, the deaths raise the possibility of escalating regional conflict in the wake of the Gaza conflict. Oil prices rose after Biden’s remarks, but have since fallen.
United Airlines has reportedly begun negotiations to purchase Airbus aircraft. According to Reuters, United Airlines CEO Scott Kirby recently said the company may buy more A321neos to make up for delays with Boeing planes following safety questions about its 737 Max 9 aircraft. was raised. Kirby last week called the grounding of the Max 9 planes and the subsequent delay of United’s 10 Max planes on order “the straw that broke the camel’s back for us.”
X blocks searches for Taylor Swift amid flood of explicit deepfake photos of the singer. The social network temporarily stopped showing search results for Swift’s name after multiple accounts repeatedly posted photos that experts said were likely generated by artificial intelligence. Tech industry figures and lawmakers say the incident shows the need for stronger guardrails around technology, especially as fake content poses a potential threat to future elections. Ta.
This week’s focus will be on interest rates, employment and earnings. The Fed is expected to announce its decision on interest rates on Wednesday. Investors don’t expect any change, but will be listening to what central bank chairman Jay Powell says about when to cut rates this year. Nonfarm employment data for January is due to be released on Friday, and economists expect the unemployment rate to remain flat despite fewer new jobs. Companies reporting this week include Alphabet, Amazon, Apple, Boeing, General Motors, Meta, Microsoft, and Starbucks.
Haley’s donors waver as Trump gains momentum
As Donald Trump races towards the Republican presidential nomination, donors who have opposed him are starting to split into two camps.
Some people remain adamant about funding Nikki Haley, who is still a rival for consent. But others seem increasingly likely to focus on other races.
Hedge fund tycoon doubles down on Haley. “I may have to contribute more now.” Cliff Asness, the billionaire co-founder of AQR Management, wrote on social network X over the weekend. “Bring me Donald.”
Mr. Asnes, a co-organizer of the Haley fundraiser scheduled for this week, likened his bet to investing in venture capital. “Venture capital is usually 100% wasted, and otherwise there would be great returns.”
However, the Koch-affiliated political network may focus on parliamentary elections. In a weekend meeting with donors, officials with the Americans for Prosperity super PAC defended their support for Haley over Trump. And the group continues to support her in South Carolina ahead of the state’s Feb. 24 primary.
But super PACs appear likely to shift their focus to helping Republicans win key Senate and House races. “If Mr. Trump ends up being the nominee, the threat of a Democratic sweep increases dramatically, making the strategy of the House and Senate even more important,” a representative for the group told Axios.
There is one thing to note. What are members of the Republican megadonor network American Opportunity Alliance doing after hearing pitches from the Trump and Haley campaigns this week?
Gambling giant doubles down on U.S.
Flutter, the publicly traded gambling giant that owns sports betting site FanDuel, will begin trading on the New York Stock Exchange on Monday. The company wants its US listing to be its primary listing, with its existing listing on the London Stock Exchange likely to be a secondary listing.
The company is looking to expand its position in the fast-growing US gambling market. What’s more, Flutter appears to be the latest European company to bet on a higher valuation by crossing the Atlantic.
American gambling sector sets record 60 billion dollars Last year’s revenueFollowing a 2018 Supreme Court ruling that effectively allowed states to legalize sports betting.
FanDuel and DraftKings are neck-and-neck in the race to be the nation’s top sports betting business by market share.
The US is already Flutter’s largest market in terms of revenue., and the company expects to grow there. “They’re now a company defined by the American opportunity,” Chris Grove, a partner at consulting firm Eilers & Krejcik Gaming, told DealBook. “It makes sense that they would want to list on a U.S. exchange.”
Flutter’s reputation may increase if it goes public in the US. This is because the American market has high liquidity and a large number of investors. The company “believes it deserves the kind of recognition that DraftKings enjoys,” Grove said.
It’s a reminder of how the London Stock Exchange has struggled over the past year as many companies fled to American exchanges, partly due to valuation concerns. (David Schwimmer, head of the London Exchange, called that belief a “myth.”)
Should unions support mergers?
When the powerful Communications Workers of America union supported Microsoft’s acquisition of Activision, it argued that the deal would benefit “the company’s employees and the broader video game labor market.” Its support further strengthens Microsoft’s extensive political effort to win approval for the deal, which was completed last month.
A few weeks later, Activision announced it would lay off 1,900 people, about 9 percent of its workforce. Commentators and others cited layoffs as another example of why unions should not support mergers.
Microsoft signs unusual worker-friendly agreement with CWA Under the general agreement, the tech giant agreed to take a “neutral” approach to employee unionization efforts. Labor advocates had hoped the deal would set a precedent that would extend beyond Microsoft.
There is a high demand for support for unions among manufacturers. Companies looking to do business during the Biden administration are hoping to win the support of these groups to curry favor with a White House seen as pro-labor. Harry Katz, a labor relations expert at Cornell University, told Dealbook that this could give labor groups leverage to demand certain concessions while also giving them an opportunity to expand their membership. He said there is.
But such support does not necessarily protect jobs. The American Economic Liberties Project, a progressive think tank, cited deals last year that were supported by unions but later led to layoffs at regulators, including US Airways and American Airlines, Albertsons and Safeway. It urged the government to consider labor as part of its antitrust review.
“In principle, trade unions should not support mergers.” matt stollerAELP’s research director wrote on social media after the layoffs at Activision were announced.
Activision’s layoffs didn’t come out of the blue. As many technology companies are cutting back on employees. This can make it difficult to determine which layoffs are attributable to this transaction and which layoffs are attributable to broader industry trends.
“The layoffs affecting video game employees across Microsoft today are not an isolated event,” Beth Allen, president of CWA, told DealBook. “The neutrality agreement that CWA negotiated with Microsoft remains the best path to achieving job security and protection from termination for video game workers anywhere in the United States.”
speed reading
Information of sale
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Reddit is said to be considering a valuation of at least $5 billion for its planned IPO (Bloomberg)
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Swiss building materials giant Holcim plans to spin off its North American business, which could be valued at more than $30 billion. (WSJ)
policy
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Several top trade officials in the Biden administration have reportedly been forced out over dissatisfaction with the White House’s progress toward meeting its goals. (POLITICO)
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A footnote filed in court in one of Donald Trump’s fraud cases raises questions about whether debts owed by the former president’s company actually exist. (Daily Beast)
the best of the rest
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