Fitch downgraded the Chinese developer and its daughters Hengda Real Estate Group and Tinaji Holding LTD from category C to RD after failing to repay dollar bond yields earlier this week. The last 30-day deadline for their repayment expired on Monday, but the company warned at the weekend that it would not have the funds to repay them.
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Tianji was to repay $ 654 million in 13 percent yield bonds and another 590 million in 13.75 percent yield bonds. Such high returns are generally considered almost unpaid.
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Evergrande Group shares on the Hong Kong Stock Exchange lost 20 percent in value on Monday, and have lost 87 percent in value since January.
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Fitch mentioned that Evergrande had not issued any payment notices and did not answer its questions: “Therefore, we assume that it did not pay.”
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Fitch refers to companies that have not met their financial obligations on time, but are still tradable and have not entered the insolvency process.
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Another rating agency, S&P, said earlier this week that “the bankruptcy of Evergrande seems inevitable.” The company is expected to pay $ 3.5 billion in dollar bond yields in the coming months. According to S&P, their issuer “does not appear to have made much progress in renovating the buildings.” Evergrande Group’s liabilities are about $ 300 billion.
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Chinese authorities are trying to prevent the crash. The government of Guangdong Province, where the company is headquartered, has already announced the deployment of crisis management to the company. The National Bank of China is also trying to intervene. It announced on Monday that it will pump $ 288 billion into the economy due to the collapse of the real estate market, CNN said.
He is affected, as another Chinese company, the Kaisa Group, which has the largest dollar liabilities since Evergrand, called Fitch a limited bankrupt on Thursday.
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The construction boom in China was driven by loans. The state authorities tried to prevent the real estate bubble from growing further and limited the possibility for developers to borrow. They then had to sell part of their assets, including unfinished projects or various subsidiaries.
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