It said its current rating implied that Evergrande was “likely in or very near default.” The day before the Fitch move, Moody’s cut Evergrande’s credit rating by three notches, its third downgrade of the property giant since June. “We believe credit risk is high given tight liquidity, declining contracted sales, pressure to address payments to suppliers and contractors, and limited progress on asset disposals.” “The downgrade reflects our view that a default of some kind appears probable,” the Fitch statement said. Shares in the company have dropped by 76 percent this year and the price of many of its bonds has fallen to around 30 cents on the dollar.įitch Ratings has again cut the rating on Evergrande bonds to CC, warning of a default. This week shares in the company fell below their 2009 initial public offering, following downgrades by the major credit rating agencies and warnings of a debt default. In its report on the crisis the Financial Times warned that a default, exposing the perilous state of China’s property market, would be a “debacle that could cascade across global markets.” The company is engaged in a desperate scramble to sell off assets and raise cash while warning it faces the risk of default on bonds that are about to fall due. Since then, the situation has gone from bad to worse. In its earnings report, issued at the end of last month, it reported a fall in net profits for the year and warned that if work did not resume there was a risk of “impairment” on the projects and problems for its liquidity. It has 778 projects across 233 cities in China. The company said that with the “coordination and support of the government” it was working with suppliers and construction companies to resume work on its property developments. The company, which has more than $300 billion in debts, came under scrutiny in August when the government ordered it to take action to resolve its debt problems. Shares in its electric vehicle (EV) unit fell 5.5% after earlier rising as much as 5.8% as the developer said it would prioritise the growth of its EV business.The Chinese bond market and its financial system more broadly are coming under increasing pressure because of the crisis at Evergrande, one of the country’s largest property developers, with potential flow-on effects for international markets. Modern Land's 11.8% February 2022 bond was down 1.6% at a discount of over 80% from its face value, yielding about 1,183%, according to data provider Duration Finance.Ĭhina Evergrande shares fell as much as 7.1%. The prospect of contagion and more defaults have weighed on the sector in a major setback for investors.Ĭhinese Estates Holdings Ltd said it would book a loss of HK$288.37 million ($2.24 billion) in the current fiscal year from its latest sale of bonds issued by Chinese property developer Kaisa Group Holdings Ltd. The broader Hang Seng index edged down 0.6% while China's CSI300 index slipped 0.3%. Shares of property developers extended losses, hurt also by concerns over China's plans to introduce a real estate tax.Ĭhina's CSI 300 Real Estate Index fell 2.7%, and the Hang Seng Mainland Properties Index dropped nearly 5.1%. Modern Land (China) Co Ltd said in a filing on Tuesday that it had not repaid principal and interest on its 12.85% senior notes that matured Monday due to "unexpected liquidity issues".ĭevelopers are defaulting "one by one", said an investor with exposure to Chinese high-yield debt, who asked not to be named as he was not authorised to speak with media.Įarlier this month, Fantasia Holdings Group defaulted on a maturing dollar bond that heightened concerns in international debt markets, already roiled by worries over whether Evergrande would meet its obligations.Įvergrande, which narrowly averted a costly default last week, is reeling under more than $300 million in liabilities and has a major payment deadline on Friday. Modern Land has missed a bond payment, the latest Chinese property developer to do so, adding to worries about wider effects of the debt crisis at behemoth China Evergrande Group and dragging on shares in the sector.Ĭhina's state planner is set to meet with property firms carrying large dollar-denominated debts later in the day to take stock of their total issuance volume and repayment capability, amid the mounting concerns about liquidity.
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