Fitch acknowledges Evergrande’s default

Posted on Dec 9, 2019 2021 at 11:02Updated Dec 9, 2019 2021 at 13:46

The fall now seems inevitable. While Evergrande failed to pay the coupons for two of its “offshore” bonds on Monday evening, before the expiration of the thirty-day grace period that began on November 6, the rating agency Fitch downgraded , this Thursday, the note of the Chinese real estate giant to RD for “restricted default”.

The agency explained that the real estate developer, who is drowning in $ 300 billion in debt, did not respond to his request to confirm that he had paid the coupons owed to his creditors on Monday, the amount of which s ‘amounts to $ 82.5 million. The restricted default rating means the company has failed to repay its creditors on time on a material obligation.

No bankruptcy filing yet

However, it has not yet filed for bankruptcy or been put into receivership, Fitch told the Dow Jones agency. “The company has not been placed in receivership, has not been put into liquidation or has not been the subject of other official liquidation proceedings, and has not ceased its activities”, added the ‘agency.

Kaisa, another struggling Chinese developer, was also declared narrow in default by Fitch, after failing to repay a $ 400 million bond that matured on Tuesday.

The default is now “inevitable” for Evergrande, already estimated the rating agency S & P Global Ratings Tuesday. After failing to meet several deadlines since September, the group had so far managed to transfer the funds to its creditors before the expiration of the grace period. This is the first time he has failed.

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A market event

The governor of the People’s Bank of China said on Thursday that Evergrande’s inability to repay its creditors was a market event and that he would be treated as such. The rights of investors will be respected, he said.

These claims show once again that Beijing is unwilling to bail out the real estate juggernaut altogether. The Chinese authorities are, however, preparing for a long and difficult restructuring in order to prevent the entire sector from bearing the brunt of the fall of Evergrande.

On Monday, the Central Bank of China sent a reassuring signal by deciding to reduce the capital reserve rate imposed on banks, thereby injecting nearly $ 188 billion in liquidity into the financial system. On the same day, a Politburo meeting announced an easing of restrictions on real estate, helping to stabilize the country’s financial markets.

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