PR92564

BERLIN, Oct. 25 /PRNewswire=KYODO JBN/ --

The almost unavoidable bankruptcy of Evergrande could even trigger a global

financial crisis. This is shown by the DMSA research report "The Great Reset -

Evergrande and the Final Meltdown of the Global Financial System”.

In the research report, former Fitch analyst Dr. Marco Metzler demonstrates

that a bankruptcy of real estate developer Evergrande could trigger a global

financial crisis. The developer, which directly or indirectly employs around

four million people, has accumulated around $300 billion in debt that it cannot

repay on time.

Metzler, who already correctly predicted the bankruptcy of Mannheimer

Lebensversicherung in 2003, and his two co-authors - Michael Ewy and Asia

expert Duc Dam - demonstrate in detail in the report for the German market

screening agency DMSA that international investors alone have put around 23.67

billion US dollars into 23 bonds and three large loans of the lurching property

developer. Among the already known institutional investors are such well-known

addresses as Fidelity, Blackrock, UBS, Ashmore Group, Prudential, HSBC, Pictet,

Vontobel, BNP and Allianz. "At the same time, we are far from aware of all

international investors, but only 148 investors with increased reporting

obligations, such as fund companies, who have invested a total of $3.44

billion, are known. There could still be some negative surprises here,"

believes Dr. Metzler.

(Note: The list of investors known so far can be taken from the DMSA report

available at www.dmsa-agentur.de).

Particularly dangerous: At the end of September, the rating agency Fitch

downgraded Evergrande's credit rating to C, giving it a recovery rating of RR6

for outstanding bonds. In other words, the agency expects investors to recover

only zero to ten percent of their invested capital in the event of Evergrande's

bankruptcy. "Assuming an average recovery of five percent, international

investors would have to immediately write off around $22.5 billion in the event

of insolvency," report author Metzler calculates. "In the worst case, some of

the international investors we don't know today could then also face

bankruptcy."

The bankruptcy of Evergrande itself, on the other hand, has probably already

occurred.. As of Monday morning German time, no confirmation had been received

- neither from Evergrande itself, nor from rating agencies on the ground,

affected bond investors or banks involved - that overdue interest of $83.5

million had been paid at the end of last week - the last possible date of the

30-day grace period. So far, there are only unconfirmed press reports that the

interest has been paid into escrow accounts.

However, it has not yet been received by the creditors. This would mean that

the company would have gone bankrupt. But even if the interest had been paid

this time, it would only be a postponement of insolvency. Because from now on,

it will be one blow after the other: The next but one (also already in arrears)

must be paid by November 10.

In addition, Evergrande is due to make a further 275.8 million US dollars in

regular coupon payments by December 6. And until January 27, distributions of

another 255.2 million US dollars are due. If it is indeed possible to service

all the coupons due, a much larger chunk of the repayment of a

two-billion-dollar bond will have to be paid off by March 23, 2022 at the

latest.

According to the respected Chinese business magazine Caixin, Evergrande will

have to raise a total of 106 billion euros for interest and repayments within

the next twelve months. "In the unlikely event that the Chinese government does

not step in, Evergrande's collapse must be regarded as certain," says report

author Metzler, interpreting these figures.

The bankruptcy of the dangerously lurching developer is merely the first stage

of a financial chain reaction that such a bankruptcy is likely to trigger. In

their report, Dr. Metzler and Co. make it clear that Evergrande is not the only

Chinese real estate developer in trouble. Fantasia, Modern Land and Sinic, for

example, have also recently been unable to service their debts. The entire real

estate sector, which accounts for 25 to 30 percent of economic output in China,

is completely overheated. Any bankruptcy can drag down other Chinese real

estate companies, banks and insurers.

In addition, an Evergrande bankruptcy is likely to significantly slow down

Chinese economic growth. The economic problems in China will then become even

more apparent. Keywords: energy and raw material shortages, plant and port

closures, and the over-indebtedness of the state, companies and private

individuals. The debt ratio is already 230 percent of the country's annual

economic output. "This could have devastating consequences for the global

economy. Supply chains would be put under even greater strain than they already

are today - if they don't break completely," predicts report author Marco

Metzler. This, in turn, would then inevitably lead to galloping inflation in

the USA and Europe.

In the view of the report authors, a bankruptcy of Evergrande has the potential

to lead to extreme disruption of the global financial system - with

bankruptcies of players that are still considered rock solid today. "Triggered

by a Chinese financial virus called Evergrande, the world may be facing a

'Great Reset' - the final meltdown of the current global financial system," Dr.

Marco Metzler pessimistically concludes.

Please find more information and the research report at www.dmsa-agentur.de

About DMSA Deutsche Markt Screening Agentur GmbH:

DMSA Deutsche Markt Screening Agentur GmbH, is an independent data service that

collects and evaluates market-relevant information on companies, products and

services. DMSA sees itself as an advocate for consumers, private customers and

intelligent investors. The claim: to always look at companies and providers,

products and services through the eyes of the customers. The customers are the

focus of DMSA's work. For them, important and decision-relevant information is

bundled and presented as market screenings. The aim is to create more

transparency for consumers when selecting products, investments and services.

Press contact:

Inga Oldewurtel

Press Officer

mailto: oldewurtel@prio-pr.de

Tel.: +49 176 62 26 18 97

Responsible for the content:

DMSA Deutsche Markt Screening Agentur GmbH

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10439 Berlin

Germany

Michael Ewy

Managing Director

http://www.dmsa-agentur.de

Source: DMSA Deutsche Markt Screening Agentur GmbH