#Evergrande defaults upgrade

#Evergrande defaults upgrade

Other rating agencies, such as Moody’s and S&P Global, have not been so quick to upgrade their status of China Evergrande.

Interestingly, China Evergrande is the twelfth Chinese real estate firm to default on bonds in 2021, and by far the largest to do so. Perhaps fortuitously, it was the failure by China Evergrande to make interest payments to this very group of investors that prompted Fitch Ratings to upgrade the Company’s status to “restricted default” on December 9. Off-shore bondholders will likely be the least prioritised of the Company’s investors when receiving interest payments or reparations. One such unlucky purchaser of China Evergrande corporate bonds, among others, are off-shore investors.

Put simply, the cash flow of the Company, severely dampened by the cooling Chinese housing market, is not enough for it to service interest payments to those from which it borrowed funds, typically in the form of interest-bearing corporate bonds. (As an aside, it is believed that China Evergrande could have an additional US $150 billion in debt, off its official financial books). The Company has more than US $300 billion in debt that, as it warned the market back in September, it believed would be difficult for it to service. That contributed to a wave of defaults, which undermined the confidence of potential buyers and reverberated through the industry.īeijing has recently sought to support the sector by cutting mortgage rates, slashing red tape and offering more loans to developers.China Evergrande, the second-largest real estate developer in China, has been narrowly dodging default for months. Housing reform in China during the late 1990s unleashed a property boom.īut amid concern about the potential risks to the financial system and the economy from the massive debt accrued by the industry’s biggest players, Beijing began to tighten developers’ access to credit in 2020. In July, Evergrande reported a net loss of more than $113bn in 20.

The latest court documents referenced restructuring proceedings in Hong Kong, the Cayman Islands and the British Virgin Islands.Įvergrande has said creditors may be able to vote this month on restructuring, with possible approval by Hong Kong and British Virgin Islands courts in the first week of September. The plan offers creditors a choice to swap their debt into new notes issued by the company and equities in two subsidiaries, Evergrande Property Services Group and Evergrande New Energy Vehicle Group. A late 2021 default triggered a string of defaults at other builders, resulting in thousands of unfinished homes across China and raising questions about megaprojects overseas.Įvergrande, founded in 1996 in the southern province of Guangzhou by Hui Ka Yan, unveiled a proposal for its debt restructuring earlier this year. The health of Country Garden, China’s largest privately run developer, is also worrying investors after the company missed some interest payments this month and said there were “major uncertainties in the redemption of corporate bonds”.Įvergrande recently had $330bn of liabilities. Since the sector’s debt crisis unfolded in mid-2021, companies accounting for 40 percent of Chinese home sales have defaulted. The filing comes amid growing fears that problems in China’s property sector could spread as growth in the world’s second-biggest economy slows.

Keep reading list of 4 items list 1 of 4 China slips into deflation as prices fall for first time since early 2021 list 2 of 4 China’s state planner unveils steps to boost private investment list 3 of 4 China’s economy misses forecasts as youth joblessness hits record list 4 of 4 China’s cash-strapped local governments can’t pay workers on time end of listĮvergrande, as well as an affiliate Tianji Holdings, filed for Chapter 15 bankruptcy protection in a New York court on Thursday.Ĭhapter 15 provides mechanisms for dealing with insolvency cases involving more than one country.