But instead of resolving questions about the fate of the Chinese behemoth, the announcement only deepened them. This story has been published from a wire agency feed without modifications to the text. On Thursday, three days after a deadline passed leaving bondholders with nothing but silence from the company, a major credit ratings firm declared that Evergrande was in default. But that business model has been scuttled by hundreds of new rules designed to curb developers' debt frenzy and promote affordable housing.Īny prospect of Evergrande's demise raises questions over more than 1,300 real estate projects it has in some 280 cities. Shares in Evergrande ended up 3% on Wednesday, while stock in the EV unit closed the day 0.8% higher after having risen more than 2% earlier.įounded in Guangzhou in 1996, Evergrande epitomised a freewheeling era of borrowing and building. The unit is seeking Chinese regulatory approval to sell its inaugural Hengchi 5 sport-utility vehicles.Ĭhina Evergrande New Energy Vehicle Group Ltd plans to sell HK$500 million ($64 million) worth of shares to fund production of new energy cars. Once China's top-selling property developer, Evergrande narrowly averted catastrophic defaults twice last month by paying interest for its offshore bonds just before the expiration of their grace periods.ĭespite the company's debt problems, its electric vehicles (EV) unit is pushing ahead with its business plan. Treasuries widened to a more than five-month high. Rising concerns about the developers' woes spreading to other sectors was visible on Wednesday as the spread, or risk premium, between lower risk, investment grade Chinese firms and U.S. In the near future, real estate companies will issue bonds in the open market for financing, while banks and other institutional investors will assist via bond investment, said the paper.ĭebt-laden developers including Evergrande and peer Kaisa Group have also been looking to raise cash to repay their many creditors by selling some of their property and other business assets.īeijing has been prodding government-owned firms and state-backed property developers to purchase some of Evergrande's assets to try to control the fall. Underlining the liquidity squeeze, some real estate firms disclosed plans to issue debt in the inter-bank market at a meeting with China's inter-bank bond market regulator, the Securities Times reported on Wednesday. Shares of developer Fantasia Holdings plunged 50% on Wednesday after it said there was no guarantee it would be able to meet its other financial obligations following a missed payment of $205.7 million that was due on Oct. Worries over the potential fallout from Evergrande have also roiled China's property sector in recent days, slamming the bonds of real estate companies amid worries the crisis could spread to other markets and sectors. S&P considers a rating under "BBB-" to be speculative grade. S&P Global Ratings said on Wednesday it had downgraded property developer Shimao Group Holdings' rating to "BB+" from "BBB-" over concerns that tough business conditions would hinder the company's efforts to reduce debts. Regulators last month eased some restrictions on bond sales by real estate firms and developers in hopes of limiting credit to overleveraged borrowers without cutting loans off entirely.More developers are seeing their credit ratings slashed on their worsening financial profiles. Outside of direct intervention, Chinese officials have taken steps to limit the impact of Evergrande’s seemingly inevitable default. Instead, policymakers have appointed officials to oversee the restructuring of the developer in a more hands-off approach, Bloomberg noted. So far, Chinese officials haven’t shown any willingness to bail Evergrande out. The company first reported more than $300 billion in liabilities in June, triggering a close watch of how the Shenzhen-based firm would navigate the crisis and how the Chinese government would respond. The company didn’t confirm the missed payments with the credit rating firm, but bondholders reported they didn’t receive the money earlier this week.Įvergrande could face cross defaults on its $19.2 billion debt following the rating cut, according to Bloomberg. Evergrande founder Hui Ka Yan (Getty, iStock)Ī moment six months in the making finally came to pass as Evergrande was labeled in “restricted default” following two missed coupon payments on Monday.įitch Ratings cut the Chinese developer’s rating on Thursday, Bloomberg reported.
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