China Evergrande Group has officially defaulted on its debt, Fitch Ratings said on Thursday.
The credit ratings agency downgraded the embattled Chinese property developer and its subsidiaries on Thursday to “restricted default”, reflecting its inability to service its financial obligations.
Fitch explained that Evergrande has “experienced an uncured payment default on a material financial obligation” – the obligation being interest due this week on two dollar-denominated bonds.
“The company did not respond to our request for confirmation on the coupon payments. We are therefore assuming they were not paid,” Fitch said.
Evergrande, which boasted some 1,300 building projects across China, is saddled with debt exceeding $400 billion.
Earlier this week (6 December), Evergrande announced a restructuring plan, noting the formation of a risk management committee that comprises the company’s senior management, representatives from state-owned enterprises and financial institutions such as China Cinda Asset Management, to “mitigate and eliminate” the group’s future risks.
There is, however, limited information available on the company’s restructuring plan at this stage.
In a separate statement earlier this week, S&P noted that “default looks inevitable for Evergrande”.
"The issuer does not seem to be making much progress in resuming construction, given its difficulties in raising new financing," S&P said.
In recent days, the People’s Bank of China has also addressed the issue, with Governor Yi Gang telling a seminar in Hong Kong, in a pre-recorded message on Thursday, that the giant’s inability to meet its obligations is a market event that would be dealt with in a market-oriented way.
"The rights of shareholders and creditors of Evergrande will be fully respected in accordance to their legal seniority,” Yi Gang said.
Evergrande isn’t the only Chinese developer in trouble, with Fitch also announcing a downgrade of Kaisa Group to “restricted default”. Together, the two giants are said to account for 15 per cent of outstanding dollar bonds sold by Chinese developers.
Maja's career in journalism spans well over a decade across finance, business and politics. Now an experienced editor and reporter across all elements of the financial services sector, prior to joining Momentum Media, Maja reported for several established news outlets in Southeast Europe, scrutinising key processes in post-conflict societies.
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