Last time we talked was almost I think almost exactly about a month ago. Not that anything has changed but what have you guys been busy
with since then. Well we've been busy trying to to understand the size of the
liabilities of those various developers. And quite frankly it's a minefield.
It's it's it's pretty much impossible to do. I said twice as the exact amount of liabilities based on public information because
the structures are just so complex. Right. Well what do you think's behind though the at least on the ever grand specific
part some of these bonds have rallied 20 30 percent over the last month or so. What do you think is behind that.
Well you know it's it's easy to rally you when you're trading at 25 cents and you go up 30 cents. Right. You know that's just
just that's just the almost a normal day's move if you were trading a little bit higher. But ultimately it's it's a little
bit of optimism. That is you know I'm sort of mind boggling in my mind based on coupons being paid and inadequately a lot of
the supply may have been cleaned. And we were talking about this during the break. What is surprising but also not surprising
Evergrande actually hasn't defaulted. That's right. And you know it's it's a it's a good question on why they have not defaulted.
There is no doubt in my mind that it restructuring is going to be needed at some point in the very near future. So why'd you go
and you to be the interest. We integrate spirit supposedly because you want to complete a few transactions which was our
idea. Do you ever side of traders. Well in this restructuring which as you point out could be one
of the largest ever at least in the Asia Pacific. I will I would imagine involve some form of government intervention. That's a
fairly fluid concept of course I'm throwing out there. I'd take a take an educated guess. Michelle what do you in what form do
you think the government's going to get involved here. Well do the way the government seems to be heading is no to be
directly involved but may have to facilitate some transactions. through asset sales to state owned enterprises and then you will need
to control of a large portion of the assets. And at the same time we'll provide some liquidity for for
restructuring to take place. OK. Now the three red lions I mean we all know of course one
that is in terms of just being able at this stage and coming in and saying don't cross these lines as far as leverage. You know
it brings to mind Kaisa for example which was the company that that really came under focus in the last couple of days or so.
Do you think the three red lines if you abide by that how reliable of an indicator is that to you that a company that
doesn't meet those those requirements or standards doesn't come under market or liquidity stress.
Well certainly it's it's not terribly reliable. And and and you could argue that to a certain extent the dreaded red lines have
sort of backfired because it's forged some of the developers to create structures to joint ventures to guarantees that are maybe
not guaranteed in a few days throughout the year so that you can manipulate the true red lines to to show less leverage. Right.
In the meantime increasing your leverage and increasing the opacity of fewer of your balance sheets.
So the likelihood then and it's really anybody's guess at this point is that evergreen restructures but then other smaller
developers default. Is that is that a reasonable base case to have that this one given the current information we have.
Yeah I actually think that it's it's the same right. You know intimately you are defaulting to be restructured. So the
majority of the Developers ... recently devoted that will devote soon will end up doing some for some
form of restructuring with some form of the debt extension. So not terribly different than the scenario where if aggrandize is
most likely headed. So what do you think's ahead. What are these ahead. Is is at some point some form of proposal and
negotiations both onshore and offshore which will mean a very long extension of the debt maturities and potentially or most
likely with local burns or peak interest for a couple of years and combined with some form of asset sales.
Right. And you know we started out as interview Michelle with you saying you know we're still trying to figure stuff out. I
mean even a distressed house like yourself is trying to figure out really where the rules are here.
It brings to mind that this market that a lot of firsts. Right. There's a lot. You know we're trying to figure it out. And in
what way the legal system is gonna protect say bondholders. We're trying to figure out what the rules are from the
government. The reason I bring those two things up is we had the downgrade.
I think it was Moody's on Alien one of the developers. I guess my question is for someone like you how much more do
ratings agencies actually know if all of us are trying to figure out what really remains outside the purview of public
information. Well you know I don't know the answer to that. I don't know what. You probably have better access to true
information than that than we do. But you know as I said you know I'm investing in Chinese properties in Chinese offshore
runs a bit of a minefield because it's very difficult to ISE says Dubai. It's very you don't have a ton of information under
it under Land Bank. The exact locations and under hundreds and thousands of projects.
And on the other side you don't truly know the extent of the liabilities and where you sit in the structure.
Michelle before I let you go a final question very quickly please if you can. You have a nice smile on your face. I'm
guessing you guys are active still in the market this week. Well we are super active there. You know the thing I can tell
you is that the market is more attractive than it was eight months ago. But we have some at some some answers.
But but but not many. And we've got to run too many assumptions. And I know I noticed India the up. I get exhausted. You're
running through hundreds of pages and reports and trying to find some news that will help them to come to a conclusion.