Hello and welcome. You are listening to Patrick Boyle on Finance, a podcast exploring ideas from quantitative finance, examining events occurring in markets right now and financial history to see what lessons can be taken away, including interviews with some of the most interesting people in the world of finance. To learn more about the podcast, visit onfinance.org.

Welcome back, everyone. Another quick piece on the developing situation with the Evergrand Bankruptcy,

where we'll discuss the almost 400 lawsuits that have been launched to date.

So over the last few months, according to records from the Guangzhou Intermediary People's

Court, $13 billion worth of lawsuits have been opened against Evergrand over non-payment

of debts.

Now Evergrand was declared to be in restricted default on December

the 9th by Fitch ratings, but all of these 367 unsure lawsuits being handled by the Chinese

courts were submitted before that date. In fact, these lawsuits began piling up towards the end of August right after the Chinese

Central Bank first publicly criticised Evergrand and its management over its debt crisis.

The earliest lawsuits back in August came from construction companies and home buyers who

saw the writing on the wall and were nervous about being paid.

After that, financial lenders began to dominate.

Now, we're of course at a very early stage in any restructuring.

We're talking here about $13 billion of lawsuits for a company that has liabilities of over $300 billion.

Like I said, all of these lawsuits were launched before the official default on December

the 9th.

In addition, we must keep in mind that Chinese bankruptcy law gives preference to secured

creditors like banks over unsecured lenders like bondholders. So the banks don't really need

to jockey for position early on. On top of that, the banks in China are a majority owned

by the Chinese government and might have less to worry about than private creditors. They'll

be involved in the political negotiations around repayment.

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