Evergrande's future is increasingly in the balance. S&P Global Ratings the Chinese real estate giant, which has been in trouble for months due to over 300 billion debts in its portfolio and Chinese President Xi Jinping's campaign to downsize the over-indebted giants and an overheated real estate market, declared insolvent.
The US rating agency downgraded the rating to “selective default” for failure to pay coupons by the end of the grace period, which ended in early December, which could trigger cross defaults on the company's $19,2 billion in debt. Following the downgrade, Evergrande asked S&P to withdraw his rating on the group. The wording "selective default", underlines the agency, "refers to the non-payment of a bond and not necessarily all of them". S&P “believes that Evergrande and its offshore finance division Tianji Holding have failed to make coupon payments on senior dollar bonds,” further noting that “Evergrande, Tianji and the trustees have not made any announcements or confirmed the payment status of coupons”.
Recall that last December 9 also Fitch had made a similar decision, cutting Evergrande's long-term foreign currency rating from C to RD, an acronym for Restricted Default, a level that indicates that an entity has defaulted on one or more financial commitments while continuing to honor other financial commitments. In addition to downgrading the parent company, Fitch had downgraded two of its subsidiaries, Hengda Real Estate and Tianji Holding Limited, both involved in the issuance of the defaulted bonds, the former worth $645 million, with a 13% coupon. and the second of 590 million, with a coupon of 13,75%.
Meanwhile, concern is growing for the stability of the entire Chinese real estate market. Just today, Moody's and Fitch announced that they have downgraded the rating by two notches Shimao Group, another real estate giant, taking it from Ba1 to Ba3. Underlying the downgrade is "Shimao's increased refinancing risk due to its limited access to finance and sizeable debt maturities over the next 6 to 12 months," said Celine Yang, a senior analyst at Moody's, according to which the company's sales decline will continue, further reducing the company's operating cash flow and liquidity. “The revision for the downgrade reflects uncertainty about the company's ability to raise new funding, through new loans or asset disposals, to handle its refinancing needs over the next 6 to 12 months,” Yang added.
Fitch finally decided to downgrade the manufacturer's long-term foreign currency issuer (IDR) default ratings as well Guangzhou R & F and its subsidiary R&F Properties, moving them to C from B, after the company launched a public offering and consent solicitation a few days ago to reduce the price payable on principal of its $725 million senior notes maturing on 13 January 2022 or to extend the maturity of the securities. Investors have the option to be paid $830 plus accrued interest immediately for every $1.000 of notes. Alternatively, only 50% of the principal will be repaid on the maturity date and the remaining 50% will be extended for six months until July 13, 2022.
