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Depends on how they operate. Selling subsidiaries as going concerns or handing their shares to creditors of the parent are often options. It's in no way a give
by vidarh 3y ago
Depends on how they operate. Selling subsidiaries as going concerns or handing their shares to creditors of the parent are often options.
It's in no way a given that a subsidiary is insolvent just because the parent is.
This isn't unusual. E.g. when Commodore went bankrupt several subsidiaries continued to operate as long as they had stock, and the UK subsidiary even tried to organize a buyout of its parent.
- loeg 3y ago> It's in no way a given that a subsidiary is insolvent just because the parent is. In general, sure, but in this case, no. The subsidiary has, at most, $260B of assets against $275B of debt. It's insolvent.
- vidarh 3y agoEven then, depending on jurisdiction (and I have no idea about the specifics in China) balance sheet insolvency may or may not be sufficient for bankruptcy. E.g. in particular in situations where there is any way to justify that they will not become cash flow insolvent. If they can somehow make a reasonable case that their assets will appreciate in value faster than their debts will come due. Thought it might put additional constraints on their spending. Note that I'm not arguing that they're a going concern - I have no idea, but given they're presumably dependent on Chinese property prices for their assets valuation it does sound dicey - just how it might be possible for them to justify not winding up the subsidiary.