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China Evergrande is not ‘too big to fail’, says Global Times editor

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The China Evergrande Centre building sign is seen in Hong Kong, China. August 25, 2021. REUTERS/Tyrone Siu/File Photo

HONG KONG, Sept 17 (Reuters) – The editor-in-chief of state-backed Chinese newspaper Global Times warned debt-ridden property giant Evergrande Group (3333.HK) that it should not bet on a government bailout on the assumption that it is “too big to fail”.

It was the first commentary to appear in state-backed media casting doubt on a government bailout for the country’s No.2 property developer, whose shares fell on Friday for the fifth consecutive day amid concerns it is heading for default.

Evergrande is scrambling to raise funds to pay its many lenders and suppliers and investors, with regulators warning its $305 billion of liabilities could spark broader risks to the country’s financial system if not stabilised. read more

Global Times’ editor-in-chief Hu Xijin said on his WeChat social media account on Thursday that Evergrande should turn to the market for salvation, not the government.

He said Evergrande’s potential bankruptcy was unlikely to trigger a systemic financial storm like the collapse of Lehman Brothers, because it was a real estate business not a bank and downpayment ratios on property in China were very high.

Global Times is a nationalistic tabloid published by the Communist Party’s People’s Daily. Its views do not necessarily reflect the official thinking of policymakers.

Policymakers are telling Evergrande’s major lenders to extend interest payments or rollover loans, and market watchers increasingly think a direct bailout from the government is unlikely.

A group of Evergrande’s offshore bondholders has selected investment bank Moelis & Co and law firm Kirkland & Ellis as advisers on a potential restructuring of a tranche of bonds, focusing on around $20 billion in outstanding dollar bonds in the event of non-payment, sources told Reuters. read more

Evergrande is due to pay $83.5 million interest on Sept. 23 for its March 2022 bond . It has another $47.5 million interest payment due on Sept. 29 for the March 2024 notes . The bonds would default if Evergrande fails to pay the interest within 30 days.

The debacle of Evergrande – which has more than 1,300 real estate projects in over 280 cities – is dampening the yuan and confidence in Chinese assets more broadly.

Evergrande shares fell another 13% to HK$2.28 on Friday, the lowest level since Oct 2011. Its offshore Oct 2023 bond fell 10% to 16.125 cents

China Minsheng Banking Corp , one of Evergrande’s major lenders, dropped 4.6% to a record low of HK$2.80.

Reporting by Clare Jim; Editing by Stephen Coates

Our Standards: The Thomson Reuters Trust Principles.

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China Evergrande bond trading suspended after downgrade

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SHANGHAI, Sept 16 (Reuters) – China Evergrande Group’s (3333.HK) main unit, Hengda Real Estate Group Co Ltd, applied on Thursday to suspend trading of its onshore corporate bonds following a downgrade, as the country’s No.2 property developer wrestles with a liquidity crisis.

The application follows repeated trading freezes of the bonds in recent days by the Shanghai and Shenzhen stock exchanges due to volatile trade.

Hengda received notice on Sept. 15 from rating agency China Chengxin International (CCXI) that the bonds’ ratings had been downgraded to A from AA, and that both the bonds ratings and its issuer rating were put on a watch list for further downgrades, it said in a stock exchange filing.

Hengda applied to suspend trade of its onshore corporate bonds for one day, it said. On the resumption of trade on Sept. 17, its Shanghai and Shenzhen exchange-traded bonds will only be traded through negotiated transactions.

A bond trader, who declined to be identified, said that the changes in the trading mechanism were likely aimed at limiting participation and curbing volatility.

“Many companies would adjust the trading mechanism of their bonds ahead of default,” he said.

The company’s January 2023 Shenzhen-traded bond was last quoted at 24.99 yuan on Wednesday, and its Shanghai-traded May 2023 bond traded at 30 yuan.

China Evergrande’s 8.75% June 2025 dollar bond was trading at 29.375 cents on Thursday morning, up about 4 cents from lows on Wednesday, according to financial data provider Duration Finance.

The indebted property developer is scrambling to raise funds to pay its many lenders and suppliers, as it teeters between a messy meltdown with far-reaching impacts, a managed collapse or the less likely prospect of a bailout by Beijing. read more

Worries over possible contagion from Evergrande’s debt crisis have spilled over to other Chinese high-yield issuers. An index of Chinese high-yield dollar debt (.MERACYC) fell to 374.646 on Thursday morning, its lowest level since April 14, 2020.

Reporting by Samuel Shen and Andrew Galbraith; Editing by Jacqueline Wong and Stephen Coates

Our Standards: The Thomson Reuters Trust Principles.

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Business

China plans to break up Ant’s Alipay and force creation of separate loans app – FT

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An Alipay sign at the Shanghai office of Alipay, owned by Ant Group, an affiliate of Chinese e-commerce giant Alibaba, in Shanghai, China, September 14, 2020. REUTERS/Aly Song/File Photo

Sept 12 (Reuters) – Beijing wants to break up Alipay, the hugely popular payments app owned by Jack Ma’s Ant Group, and create a separate app for the company’s highly profitable loans business, the Financial Times reported on Sunday.

The plan will also see Ant turn over the user data that underpins its lending decisions to a new credit scoring joint-venture, which will be partly state-owned, the newspaper reported, citing two people familiar with the process.

State-backed firms are set to take a sizeable stake in Ant’s credit-scoring joint venture for the first time, three people told Reuters last week.

The partners plan to establish a personal credit-scoring firm wherein Ant and Zhejiang Tourism Investment Group Co Ltd (ZJGVTT.UL) will each own 35% of the venture, while other state-backed partners, Hangzhou Finance and Investment Group and Zhejiang Electronic Port, will each hold slightly more than 5%, said one of the people. read more

According to the FT report, Ant will not be China’s only online lender affected by the new rules. The company did not immediately respond to a Reuters’ request for a comment.

In April, Chinese regulators asked Ant to conduct a sweeping business overhaul, include turning Ant itself into a financial holding firm, and fold its two lucrative micro-loan businesses Jiebei and Huabei, into the new consumer finance firm.

Chinese regulatory authorities have been targeting Ant Group and other internet “platform” giants in a wide-ranging crackdown encompassing antitrust and privacy issues, user data and cryptocurrencies.

Reporting by Aishwarya Nair in Bengaluru; Editing by Kim Coghill

Our Standards: The Thomson Reuters Trust Principles.

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Business

London takes aim at New York with five-year financial plan

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A woman exercises with a dog near the City of London financial district, in London, Britain, April 30, 2021. REUTERS/John Sibley

  • Ambitious plan depends on tax cuts, open door hiring
  • TheCityUK says New York took top spot in 2018
  • Brexit, rise of Asian financial centres add pressure

LONDON, Sept 7 (Reuters) – Britain needs to ease taxes on banks and make it easier to hire staff from abroad, its financial and professional services lobby said in a blueprint to help London unseat New York as the world’s top international financial centre within five years.

The strategy paper on Tuesday from TheCityUK reiterated some ideas already aired in government-backed reports and elsewhere in recent months as the City of London looks to recoup ground lost following Britain’s departure from the EU. read more

“By some metrics, the UK is losing ground: London is currently slipping further behind New York each year while other centres are strengthening,” the paper said.

The U.S. financial capital overtook London in 2018 in a leading annual survey, it said, adding that New York dominated in stock market listings.

“The UK therefore needs to adopt a relentless focus on strengthening its international competitiveness to win back the prize of being the world’s leading international financial centre,” TheCityUK lobby group, which promotes the wider financial sector abroad, paper added in the paper.

Britain’s departure from the European Union effectively closed London off from its biggest financial services customer, adding further pressure to catch up.

The finance ministry has already set out reforms to make London’s capital market more competitive, and TheCityUK set a five-year target for London to “out-compete its rivals” by amending tax, visa and other rules.

Becoming the global hub for financial data, sustainability investing and investment and risk management will also be crucial in helping Britain overtake New York, TheCityUK said.

The total tax rate for a London bank is 46.5%, 13% higher than a New York based bank, it added.

But persuading government to cut taxes on finance as it mends a hole in the economy from COVID may be challenging, as will having an open door on hiring given the Brexit referendum pledged to crack down on high levels of international mobility.

The single most important issue for financial firms is being able to hire globally, TheCityUK CEO Miles Celic said.

“In conversations we have had with government, I think that is something that is absolutely understood,” he told reporters.

Reporting by Huw Jones; Editing by Alexander Smith

Our Standards: The Thomson Reuters Trust Principles.

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Business

U.S. judge declines to stop J&J from splitting talc liabilities from main business

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Aug 26 (Reuters) – A U.S. judge declined to stop Johnson & Johnson (JNJ.N) from taking steps to offload widespread Baby Powder liabilities from the rest of its business, preserving the option for the healthcare company to move thousands of claims from people who used its talc products to a unit that would file for bankruptcy.

U.S. Bankruptcy Judge Laurie Selber Silverstein denied a request from plaintiffs’ lawyers to block the move late Thursday. Lawyers for cancer victims wanted her to issue a restraining order against J&J as part of her role overseeing the bankruptcy proceedings of one of the company’s former talc suppliers.

J&J is exploring a plan to move its liabilities from widespread Baby Powder and other talc-related litigation into a newly created business that would later seek bankruptcy protection, Reuters previously reported. The company’s talc products are currently housed in a subsidiary called Johnson & Johnson Consumer Inc. read more

“The court rightly denied the plaintiffs’ motion aimed at preventing J&J from engaging in legitimate business transactions, in the event that it chooses to do so,” said Diane Sullivan, a Weil, Gotshal & Manges LLP lawyer representing J&J, in a statement.

The legal skirmish was unusual in that plaintiffs’ lawyers were asking the judge to forbid J&J from taking steps the company’s lawyers said it had not yet decided whether to pursue. Johnson & Johnson Consumer Inc has previously said it has “not decided on any particular course of action in this litigation other than to continue to defend the safety of talc and litigate these cases in the tort system, as the pending trials demonstrate.”

The judge is overseeing the bankruptcy case of Imerys Talc America, which once supplied talc to J&J and filed for Chapter 11 court protection amid mounting litigation. Imerys and J&J have since been battling one another over whether J&J is required to cover the former supplier’s legal costs under indemnification agreements. Plaintiffs’ lawyers argued that allowing J&J to offload its talc liabilities to a unit that would file for bankruptcy would harm Imerys’ reorganization.

The judge decided it would be improper as part of Imerys’ bankruptcy case for her to legally bar J&J from undertaking a hypothetical future restructuring that might result in separating the talc liabilities. She said Imerys could take legal action against J&J should J&J decide to separate its talc liabilities in a way Imerys deems harmful or unlawful.

TEXAS TWO-STEP BANKRUPTCY

J&J faces legal actions from tens of thousands of plaintiffs alleging its Baby Powder and other talc products contained asbestos and caused cancer. The plaintiffs include women suffering from ovarian cancer and others battling mesothelioma.

J&J is considering using Texas’ “divisive merger” law, which allows a company to split into at least two entities, Reuters previously reported. For J&J, that could create a new entity housing talc liabilities that would then file for bankruptcy to halt litigation.

The maneuver is known among legal experts as a Texas two-step bankruptcy, a strategy other companies facing asbestos litigation have used in recent years.

Should J&J proceed, plaintiffs who have not settled could find themselves in protracted bankruptcy proceedings with a likely much smaller company. Future payouts to plaintiffs would be dependent on how J&J decides to fund the entity housing its talc liabilities.

A 2018 Reuters investigation found J&J knew for decades that asbestos, a known carcinogen, lurked in its Baby Powder and other cosmetic talc products. The company stopped selling Baby Powder in the U.S. and Canada in May 2020, in part due to what it called “misinformation” and “unfounded allegations” about the talc-based product. J&J maintains its consumer talc products are safe and confirmed through thousands of tests to be asbestos-free.

The blue-chip company, which boasts a market value exceeding $450 billion, faces legal actions from more than 30,000 plaintiffs alleging its talc products were unsafe. In June, the U.S. Supreme Court declined to hear J&J’s appeal of a Missouri court ruling that resulted in $2 billion of damages awarded to women alleging the company’s talc caused their ovarian cancer. read more

Separately, plaintiffs lawyers are seeking a similar restraining order against J&J in a Missouri court. One of those lawyers, Andy Birchfield, said in a statement that he and other lawyers would study the Imerys ruling and continue attempts to prevent J&J from using the Texas law to separate its talc liabilities and steer them toward bankruptcy.

Reporting by Mike Spector, Maria Chutchian and Jonathan Stempel in New York; Editing by Chris Reese, Marguerita Choy and Karishma Singh

Maria Chutchian

Maria Chutchian reports on corporate bankruptcies and restructurings. She can be reached at maria.chutchian@thomsonreuters.com.

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Exclusive: Exxon launches U.S. shale gas sale to kick-start stalled divestitures

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HOUSTON, Aug 10 (Reuters) – Exxon Mobil Corp (XOM.N) has begun marketing U.S. shale gas properties as it ramps up a long-stalled program that aims to raise billions of dollars to shed unwanted assets and reduce debt taken on last year.

Three years ago, the top U.S. oil producer set a goal of raising $15 billion from sales by December 2021. More recently, it promised to accelerate lagging sales to whittle a record $70 billion debt pile.

The company’s XTO Energy shale unit is seeking buyers for almost 5,000 natural gas wells in the Fayetteville Shale in Arkansas, spokeswoman Julie King confirmed.

The assets are among gas projects with declining production and market value Exxon is selling as it focus on newer ventures in Guyana, offshore Brazil and Texas’s Permian Basin.

Exxon is marketing the properties itself and aims to receive bids by Sept. 16 and close any sale by year-end.

“We are providing information to third parties that may have an interest in the assets,” King said. No buyers have been identified, she said, declining to confirm the due date for bids or the company’s anticipated value on the wells.

DECLINING PRODUCTION

The company has achieved about a third of its three-year, $15 billion sales target.This year, it has received sales proceeds of $557 million through June, and has deals pending valued at more than $2.15 billion. read more

Exxon acquired the Fayetteville assets in 2010 for $650 million during a shale boom that would change the U.S. energy landscape, leading to an oversupply of gas that pushed prices to record lows and last year. This led Exxon to reduce the value of its U.S. oil and gas holdings by $17.1 billion. read more

Output in the assets on offer fell by more than half since 2016 to about 160 million cubic feet per day last year, according to Exxon marketing materials seen by Reuters.

The Arkansas properties cover some 416,000 net acres (1,680 square kilometers) and are some of the North American natural gas resources cut last year from Exxon’s development plan. The sale includes 844 operated and 4,104 non-operated wells, King said.

Dallas-based Merit Energy is evaluating the properties, one person familiar with the matter said. Merit in 2018 purchased about 258,000 acres in the same area from BHP for $300 million.

Merit did not reply to requests for comment by phone, e-mail and LinkedIn. Exxon declined to comment on potential bidders.

WORLDWIDE DIVESTMENTS

Exxon, which suffered a historic $22.4 billion loss in 2020, is selling dozens of properties in Asia, Africa, the United States and Europe.

The company is prioritizing debt reduction and its shareholder dividend, officials said last month. After total debt last year doubled to almost $70 billion since 2018, Exxon paid off more than $7 billion this year, to reduce its burden to $60.6 billion.

This year, it has held talks with Britain’s Savannah Energy (SAVES.L) over properties in Chad and Cameroon and sold stakes in two deep water oilfields to Occidental Petroleum (OXY.N) and others. read more

Exxon is seeing new interest in its properties with this year’s rebound in oil and gas prices, said Exxon Senior Vice President Jack Williams on July 30.

“That whole divestment discussion that we’ve had in the past continues,” Williams said.

By Sabrina Valle in Houston, Liz Hampton in Denver and Shariq Khan in Bengaluru; editing by Gary McWilliams, Marguerita Choy and David Gregorio

Our Standards: The Thomson Reuters Trust Principles.

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