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Comment by anonu | Hacker News Reader

> because exiting the position at this point removes any optionality around a successful resumption

HODL to the moon!

This sentences makes me laugh because its just HODL masked in some professional speak.

but it's not, they talk of recovery values. HODL is "this will go big, you will see!" while the statement here is "we will get 25c on the dollar as bond holders, which is better than getting 24c by selling it on the market".

Are they abusing the word optionality, or is there any way to read that that makes sense? Like what options does keeping the position open up?

If they are holders of debt, don’t get possibly get some vote on debt restructuring?

Payoff of the debt becomes like an option because it is floored at 0, but there is a chance they get something out of it. And it's not abuse of terminology, it's the technical way to describe that characteristic of distressed debt

Probably will work out too

The Chinese government was the one who triggered this crisis (by their decision to not extend a financial accommodation), so it'll work out, but whom it works out best for is likely not going to be foreign investors. This is an orchestrated deleveraging of bad debt campaign.

"That is why Chinese regulators have decided to have a showdown with creditors over Evergrande. By convincing lenders that they will no longer stand behind large Chinese borrowers, they are trying to transform the country’s financial system by making Chinese lenders more reluctant to fund nonproductive investment projects. These projects generate what Chinese leader Xi Jinping, in an important recent essay for Qiushi (the leading official theoretical journal of the Chinese Communist Party) disparaged as “fictional growth,” in contrast to the “genuine growth” he called for. [1]"

[1] https://carnegieendowment.org/chinafinancialmarkets/85391

Further reading on China's "Three Red Lines" policy:

https://www.ubs.com/global/en/asset-management/insights/chin...

Feels like western markets have lots of "fictional growth" on the books lately. We'll see if/how that unwinds.

Sure, US equities are frothy but are backed by cashflows backed by a consumerist society in a mostly functioning democracy. China's real estate market are tulips more people collect than live in.

https://www.google.com/search?q=china+real+estate+occupied+v...

>US equities are frothy but are backed by cashflows backed by a consumerist society in a mostly functioning democracy.

"backed by" is doing a tremendous amount of work in that sentence. For some comparison, Evergrande is currently worth 2x GME.

> For some comparison, Evergrande is currently worth 2x GME.

True! But GME is not a representation of Gamestop's enterprise value at the moment (and therefore, a poor analogy); GME is currently a representation of a microcosm of equity market participants attempting to determine if there "less than fundamental" mechanisms at play (derivative/index based shorts, etc) on the security.

Following up, Evergrande will be broken apart and nationalized with foreign bondholders taking a haircut.

https://asiamarkets.com/imminent-china-evergrande-deal-will-...

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