Hong Kong? Phooey!

The next big city to be rocked by crumbling financials may not be New York, Charlotte, or San Francisco, but Hong Kong.

“It’s a perfect storm,” John Hartley, head of White & Case’s Asia bank finance and restructuring practice, said in an interview in Hong Kong. “There’s a large amount of refinancing coming up, and capital is retreating with banks retracting lending and private equity and distressed opportunities funds facing redemptions.”

Banks are curbing lending as shrinking earnings increase the risk companies will be unable to repay their debts. New loan agreements in Asia-Pacific excluding Japan dwindled to $4 billion this year from $32 billion in the same period a year earlier, data compiled by Bloomberg show. The global default rate on speculative-grade debt will peak at 16.4 percent in November, worse than in the Great Depression, according to Moody’s Investors Service.

The tie-up will focus on insolvencies with a “center of gravity” in Hong Kong, including businesses from throughout Asia with holding companies in the city, according to Laracy Gall founder Nick Gall. The International Monetary Fund said last month that developing Asian economies will grow by 5.5 percent this year, the slowest pace since 1998, when the region was racked by its own financial crisis.

Corporate insolvencies started rising in Hong Kong last year after falling since 2003, according to the Official Receiver’s Office. The situation is likely to worsen, with the city’s central bank warning more than HK$100 billion ($12.9 billion) of syndicated loans will mature this year, risking defaults if companies are unable to refinance the debt.

With the credit crunch meaning super-leveraged Asian tigers can't refinance their massive debt, these companies are going to go under in a tsunami that will wipe trillions from the books.

This is a global event, folks. When this tidal wave hits, everyone else is going to be drowning in their own red ink, meaning recovery handouts from the rest of the world will be nil. The result? So many major players knocked out at the same time that the entire global system will crash...and rebooting it will take years if not a decade or more.