With the collapse of Evergrande, other Chinese property developers under scrutiny; Greenland Holding, parent of Greenland USA, still struggling.

With $300 billion in debt (versus total assets of about $240 billion) and the unfortunate designation as the world's most most indebted developer,  Evergrande, as the AP reported, "among dozens of Chinese developers that have collapsed since 2020" once the national government tried to limit borrowing. 

What does that mean for Greenland Holding Group (aka Greenland Holdings Corp.), parent of Atlantic Yards/Pacific Park developer Greenland USA, which itself is facing a foreclosure auction of its interest in six development sites in the Brooklyn project?

Well, it can't be good, though each situation is specific. Investors via the Shanghai stock market can't be optimistic; as shown in the screenshot below from Google Finance, Greenland's stock price, now 2.27 yuan, has declined 27.5% in the past year.

From Google Finance

Credit rating still low, outlook still negative

Last August, I wrote (link) how ratings agency Moody's had downgraded its rating two notches from Caa2 to Ca, which it says is "highly speculative, or near default."

Moody's also downgraded various ratings on specific Greenland notes one notch further to C, which indicates default. (Greenland Hong Kong was slightly better.)

For Greenland, the outlook was negative, reflecting "the company's weak liquidity and our expectation of weak recovery prospects for Greenland Holding's bondholders," said Daniel Zhou, a Moody's analyst.

Moody's had bad news for offshore bondholders, suggesting their recovery prospects were "low in a bankruptcy scenario, given its high debt leverage and a large amount of financing at operating subsidiary level." That suggests subsidiaries might have debts repaid separately.

That rating has not been updated, though Moody's still considers the outlook negative.

About Evergrande

China Evergrande ordered to liquidate in landmark moment for crisis-hit sector, Reuters reported Jan. 29:

A Hong Kong court on Monday ordered the liquidation of property giant China Evergrande Group (3333.HK), opens new tab, dealing a fresh blow to confidence in the country's fragile property market as policymakers step up efforts to contain a deepening crisis.
Justice Linda Chan decided to liquidate the world's most indebted developer, with more than $300 billion of total liabilities, after noting Evergrande had been unable to offer a concrete restructuring plan more than two years after defaulting on its offshore debt and following several court hearings.

One big question is how foreign creditors will be treated, given that most of the company's assets are in mainland China and court decisions in Hong Kong are not necessarily fully followed in China. But there won't be much money left. From the article:

After Evergrande said in September its flagship unit and its chairman Hui Ka Yan were being investigated by the authorities for unspecified crimes, creditors now expect a recovery rate of less than 3%.

What next?

What happens next? According to a New York Times explainer, a court-appointed restructuring firm, Alvarez & Marsal, will take over from Evergrande's board and aim to distribute the assets to creditors, while still allowing the business to run.

How it all works will be a "litmus test for foreign investors"--including pension funds--in troubled Chinese companies, given that "dozens of" similar cases are pending in Hong Kong courts.

“We should care because the Chinese economy is at the heart of the world economy and even small economic shocks can destabilize it," David Goodman, director of the China Studies Center at the University of Sydney, told the Times.

Or, in Brooklyn, we should care because another precarious company is, for now, in charge of a project that was once supposed to be transformational.