MORE ON EVERGRANDE’S QUANTUM SUPERPOSITION
If you've been watching the strange story of the big Chinese real estate investment firm Evergrande, you'll be aware that recently, Evergrande's looming default on bond interest payments were allegedly "made good" and that the impending default did not occur. In other words, a party or parties unknown paid the interest, conveniently just before Evergrande was to be significantly downgraded by ratings agencies. With that in mind, V.T. shared an interesting article with me, and I'm passing it along to you, because the article includes something very interesting that jumped off the page when I read it, seemingly once again confirming my suspicion of all things digital in the financial world. Here's the article:
The story begins with the reports that Evergrande had dodged the interest bullet:
Two weeks ago, the financial press reported that at the 11th hour, Evergrande, the second largest Chinese Real Estate Developer, made its past due interest payment one day before the ratings agencies would have declared the Company bankrupt for being in arrears for 30 days to bondholders.
Then, a week later, Evergrande pulled a rabbit out of their hat for an encore with the ‘journalists’ who cover the business of money proclaiming that Evergrande paid the second past due interest payment just before they would be baptized as bankrupt.
But, as things would have it, when queried about the alleged payments, there was no response:
Last week I wrote ‘Dr. Marco Metzler: Evergrande Missed Second Past Due Interest Payment In A Week-Is Bankrupt-Could Drag Down Real Estate Sector/HSBC & World Financial System’ detailing the work of Dr. Metzler who says that the company did not respond to his firm’s request for positive confirmation of the payment(s). With the supposed and reported making of these payments-promulgated by the media, the beleaguered company should have their investor relations department broadcasting this to the entire world, who by the way, is watching. But they don’t. Dr. Metzler got -no- confirmation from Evergrande regarding the proof of their payment. Not from them, not from any rating agency. According to Dr. Metzler in a press release referenced in my article…’the bankruptcy has apparently already technically occurred’.
On September 21, 2021, before the company was past due on its interest payments, ‘China ‘Evergrande Inches Close To Default Deadline, Investors Wait’ appeared at nasdaq.com.
As we now know, that claim was a fallacy as Evergrande missed that payment. In reading the article, the contributors at nasdaq clearly described the bond issues: …’A major test for Evergrande comes this week, with the firm due to pay $83.5 million in interest relating to its March 2022 bond VG158043114= on Thursday. It has another $47.5 million payment due on Sept. 29 for March 2024 notes VG158786753=.’…
This details enough information about the bonds so there can be no mistaking exactly which securities are in question. As is further detailed on the nasdaq article…’Citigroup Inc C.N subsidiaries serve as trustee and payment agent for a China Evergrande bond VG158043114= that matures in March 2022 and has $83.5 million in interest coming due on Thursday..’…
So we know that Citibank is the paying agent for at least one of the Evergrande bonds.
Now that's a significant clue: Citibank is the paying agent for at least one of the maturing bonds. Armed with this information, Mr. Szymanski (author of the article) went hunting. As he states, at one time he had a job with a local branch of the Federal Reserve, working precisely in the bond department. This led him to do something very unusual, or at least, unusual in contemporary practice:
Later, I worked the non-cash desk being responsible for taking in and processing the actual bonds. I am relating this story because most people in the brokerage business have never actually read a physical bond that they could hold in their hands. But I did. I made a point of reading through the covenants on the bonds and could actually see that the ‘paying agent’ was part of the covenant of the bond.
Of course today, what do investors get when they buy a bond? They only get a digital notification of the title of the bond, the interest rate and when it is due. There is actually a lot more to the ‘promises’ in a bond covenant but does anyone honor those anymore? Less and less do we see the honoring of covenants whether it is between God and man or between corporations and bondholders.
So this is why I am aware of things like the paying agent for a bond. I thank the folks at nasdaq for providing us which some of the information necessary to identify the bond issue and especially for identifying the paying agent, who in this case is Citibank.
So, just as Dr. Metzler tried to get information from Evergrande and the rating agencies about the authenticity of the alleged interest payments, so too, I tried to obtain the veracity of the media claims of remittance of interest and principle when due to bondholders which should be available from the paying agent. (Boldface emphasis added)
Needless to say, when Mr. Szymanski attempted to contact the paying agent, the Citi group, he got no response. Nada. Zip. Zilch:
The financial media has acted with subterfuge and the actual responsible parties who should be able to unequivocally provide the truth in this matter (the company and the paying agent) are silent in the face of public questions.
I would like to share that shortly after I placed the phone call to Citi Fixed Income Investor Relations that a roaring helicopter flew directly over my little house located half way to the middle of nowhere at approximately 75 feet AGL (Above Ground Level). I’m sure that this was just a coincidence (now turn off sarcasm). I also had this happen this year after I wrote ‘Dr. David Martin, CEO M•CAM Illuminates What Big Pharma Knew, When They Knew It and the case for RICO’. It was the same deal; helicopter in the middle of the afternoon, while I was outside flying approximately 75 feet AGL over the house.
Now, other than black helicopters roaring over Mr. Szymanski's house, what interests me here is the fact I've warned against more times than I can remember, namely, the reliance on digital information about a security rather than actual physical possession of the physical security itself. In this case, Mr. Szymanski complains of a problem I've often noted and commented about. Suppose one goes to a broker and buys a corporate bond, say from Frankenfauci Food and Rare Agriculture Underwriters and Developers , LLC. (ticker sign FRAUD). Rather than receiving the actual copy of the paper bond in the mail, current and common practice is simply that you'll be notified that you're the owner of bond number xxyzzp, at such and such a maturity date, and so on, as Mr. Szymanski explains. The broker usually holds the bond. Thus, like most folks, you never actually read the bond contract or covenant at all. You have no idea what it says. In fact, without the physical possession of the bond, you cannot even clip the coupons of the bonds to present to the paying agent for payment. This too, is usually all handled by the broker who keeps physical possession for you.
If indeed even the broker has it. Perhaps all he has is a digital record of the owner(s) of the bond, and of course, all they have is a digital record.
Now the bottom line here is rather obvious: how does one enforce a financial convenant one hasn't even read, because the physical covenant is... where? Who has possession? And while we're at it, how was the bond purchased initially? Probably by payments in more digital blips on a computer screen.
It's a wonderful way to create, and abscond, with lots of money, claim payments on interest that don't exist.
So, as of now, it looks like Evergrande defaulted, because there's no concrete verifiable information that payment of interest was made, yet, the story is out there, and the paying agent at least as of this writing, has not commented. Which means that, like Schroedinger's Cat, Evergrande appears to be in a state of quantum-economic superposition: it has, and has not, defaulted, like Schroedinger's cat it's both alive and dead, but we don't know, because we can't open the box and make a verifiable observation.
...now think of digital "currency", and have a nice day, and I'll see you on the flip side...
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