• The multinational developer, previously perceived as invincible, has tumbled due to overambitious borrowing – a Scrooge McDuck-like swim in debt, they thought they could handle. Oops!

• China’s cooling property market, (which has started behaving less like a sizzling steak on the barbecue and more like a leftover spud in the refrigerator), has laid out a big fat punch.

• As the developer’s debt snowballed into something almost resembling Mount Everest, creditors weren’t exactly thrilled and started doing the ‘I want my money back’ dance. It’s not as fun as the Macarena, but definitely more intense.

• Employees and suppliers felt the aftershocks as the “too big to fail” company started to crumble like a stale biscuit – and we all know that’s never pleasant.

• After building up arrears as thick as a dictionary, the developer’s assets started looking more appealing to creditors. Just like those moments on cooking shows when they’re about to eliminate someone and their dish suddenly starts looking scrumptious – talk about a plot twist!

• The developer’s woes could potentially spill over into the broader economy causing a domino effect – not the satisfying one with the dominos elegantly cascading onto each other, though. More like the one where you trip over the cat and accidentally push the first domino.

A Concrete Catastrophe or a Redevelopment Redemption?

When “Too Big To Fail” Failed

There’s nothing quite like enjoying a good ‘too big to fail’ plotline, only to watch it become a ‘too big and indeed very capable of failing’ storyline. This multinational developer hitched a ride on the express train to Debt City and the chills from China’s now thawed property market made them doubly miserable.

Dancing To The Creditors’ Tune

Ever played musical chairs where you were certain you’d grabbed a seat but ended up crashing down on your bum instead? That’s what the developer did – but replace ‘bum’ with ‘massive debt’ and ‘chair’ with ‘creditor’s patience’. It’s a sad twist of events that could possibly initiate an economy-wide game of Dominos. But, as we said, not fun dominos.

The Spillover Effect

If you thought toppling a developer, arguably the size of Godzilla, wouldn’t create tremors to tickle the rest of the economy, think again. This could be less of a trickle-down, more of a floodgate-opening scenario, and let’s be honest, nobody brought their umbrellas.

So, in essence- our developer, once the Hercules of finance, decided to engage in a debt-consuming competition against insurmountable odds. A series of missteps and a cold property market later, they found themselves sinking into a debt quicksand that seemed to have an insatiable appetite. The repercussions of this financial melee aren’t limited to the developer alone but have the potential to slap the economy with an unexpected backhand. It’s one of those stories where you cringe, gasp and pray that the ‘redevelopment redemption’ plot twist turns up real soon. After all, everyone loves a good comeback story!

Original article: https://www.inman.com/2024/01/29/once-the-biggest-developer-in-china-evergrande-is-ordered-to-liquidate/