Western hedge funds learn a valuable lesson dealing with communists!

[tn1911]

Western hedge funds that saw a killing in billions of Evergrande bonds stunned when government handed out 99% haircut instead, sources say

https://fortune.com/2024/02/08/everg...t-hedge-funds/

From afar, China Evergrande Group had all the makings of a killer distressed-debt trade: $19 billion in defaulted offshore bonds; $242 billion in assets; and a government that appeared determined to prop up the country’s faltering property market. So US and European hedge funds piled into the debt, envisioning big payouts to juice their returns.

What they got instead over the course of the next two years is a harsh lesson in the dangers of trying to bargain with the Communist Party. The talks are now dead — a Hong Kong court has ordered Evergrande’s liquidation, and the bonds are nearly worthless, trading in secondary markets at just 1 cent on the dollar.

[glocktogo]

It shouldn't pay to bet on your foes.

[ddbtoth]

Like our bond market is any better. It’s a game of musical chairs, and the Chinese cheat (surprise, surprise!). It was in their interest to dump on that company.

[SteyrAUG]

I had a friend who works in web design, he got a contract with the actual Chinese government. Signed lots and lots of contracts. He was gonna make a lot of money.

He got some start up cash and busted his ass for months to come up with a demo model with all the features they wanted. He submitted it and waited for payment...and waited....and waited....and eventually figured out he wasn't getting paid when the department was running a tweaked version of his demo model.

He also found out his contracts were worthless and you can't sue somebody for breach of contract in some imaginary international court.

[Vgex2]

Saleen learned the same lesson. Ego led him to not accept any contracts that didn't give him what he perceived as his companies value. Along comes a company from China who promised him everything he wanted. Guess how that turned out:

It’s been five years since Saleen announced a partnership to expand into the Chinese market and generate substantial revenue to ease its financial woes. In 2019, The revived company had revealed five models ranging from a new iteration of the venerable S7 to a mass-produced electric city car. The company collapsed by the end of 2020. Now, the last vestige of Saleen’s Chinese expansion is set to be sold off.

[jsbhike]

So can these be cured with TARP'esque bailouts or are we looking at WWI type action to make them whole again?

[Diamondback]

Depends on if things drag out to January and who wins. On the one hand China is a bad actor and runs scams like this regularly. On the other, anyone who invests in China deserves a financial pounding-til-their-fecal-continence-is-just-a-memory... problem here is one or the other group of bad actors has to get the money.

[henri]

Having had some minimal dealings with Chicom individuals and companies, all I can say in summary, is never trust them, and avoid at all possible.