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, another quick update on Evergrand. Today I want to discuss the Ponzi-like nature of the

Evergrand wealth management products and also go over what an unwind might look like.

Obviously, we're going to have a lot more information tomorrow when a big interest payment is due on one of their dollar-denominated bonds.

Evergrand, as I'm sure you know, is China's second largest property developer, and they have over

$300 billion in liabilities.

And as I'm sure you've seen in the news, the company is in the throes of a liquidity crisis.

Tomorrow is going to be a big day for Evergrand, as they have an interest payment on a dollar

denominated bond of $83.5 million that comes due. This is on an 8.5% five-year dollar denominated bond.

There's a good chance that they're going to miss this payment, but this will not actually count as a default, as according to the bond's covenants, there is a 30-day period before a missed payment is considered a default.

They also need to pay $36 million on an onshore bond on the same day.

This one is more likely to be paid.

That doesn't mean it's extremely likely that it'll be paid.

It's likely to be more of a priority.

In total, they have $669 million in coupon payments coming due through the end of this year.

$615 million of that is on dollar-denominated bonds.

Now I mentioned in my earlier videos that they have a wealth management affiliate that

offers financial products to Chinese investors backed by the company's credit.

There's about $6 billion worth of these products outstanding.

Although $6 billion is a small fraction of the $310 billion of total liabilities which has

been rattling the global markets.

Investor Fury within China has made these debts a flashpoint.

...