Evergrande rated ‘default restricted’ by Fitch after missed payment – .

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Evergrande rated ‘default restricted’ by Fitch after missed payment – .


Fitch became the first rating agency to declare China Evergrande’s foreign bonds in default after the world’s most indebted developer failed to make a crucial interest payment this week.

The announcement marked the most significant moment yet in the developer’s marathon liquidity crunch that has spread to other companies in the country’s vast real estate sector and has fueled global concerns about the potential impact on the Chinese economy.

Evergrande, whose liabilities exceed $ 300 billion, missed a deadline on Monday to repay bond coupons totaling $ 82.5 million. The group had still not transferred the funds Wednesday to New York, according to people familiar with the matter.

Fitch said the company did not respond to a request for confirmation about coupon payments and therefore assumed they had not been made.

Neither the company nor the Chinese government have confirmed that Evergrande has defaulted on its debts, although the company said on Friday that there was “no guarantee” that it would be able to repay its debts while it was entering a restructuring process with the help of local government officials.

Fitch also said Thursday that Kaisa, another heavily indebted developer who failed to repay a $ 400 million bond that matured on Tuesday, was in narrow default. A person familiar with the situation said Kaisa was on the verge of signing nondisclosure agreements with investor advisers.

Evergrande’s debt crisis has for months slashed the international bond markets, where he has borrowed heavily and has about $ 19 billion in debt, compared to Kaisa’s $ 12 billion. Evergrande has missed a string of interest payments since late September, but until this week he had avoided default by transferring the funds before the end of the 30-day grace periods.

Separately, on Thursday afternoon, Yi Gang, Governor of the People’s Bank of China, told a seminar in Hong Kong that Evergrande’s breach of its obligations was a market event and that investors’ rights would be respected.

The central bank released $ 188 billion in liquidity into the financial system on Monday in an attempt to offset anxiety resulting from the Evergrande debt crisis.

Group chairman Hui Ka Yan has withstood pressure to raise funds through the rapid sale of the heavily indebted developer’s best assets, including land, urban redevelopment projects in the Pearl River Delta – the prosperous region of southern China around Hong Kong – and the company’s property management unit. , according to people familiar with the matter.

“Hui wants to keep Evergrande’s most valuable assets unless he can sell them for a good price, which isn’t going to happen because everyone knows he’s under pressure,” a person close said. Chinese financial regulators.

Evergrande has also stepped up a lobbying campaign for more support from state-owned banks in recent weeks to help it avert an operational collapse.

The developer told homebuyers and government officials in Wuhan and Nanning, two provincial capitals where he has blocked projects, that he is in talks with state governments for credit, according to two people familiar with the negotiations. of the company with local government officials.

Evergrande did not respond to a request for comment.

On November 22, an Evergrande representative in Wuhan said the company had applied for business loans from state lenders to support its operations there, according to meeting minutes viewed by the Financial Times.

“If our loan application is approved, we will consider reimbursing vendors on the condition that we complete ongoing projects,” the executive said.

On Monday, Hui said the group is forming a new risk management committee, with state officials holding four of the seven seats.

Evergrande has nearly 800 projects across China, many of which are funded by down payments from home buyers.

Local governments have set aside homebuyers’ deposits and other funds to ensure Evergrande projects in their jurisdiction are completed and contractors are paid on time.

The group’s central role in the Chinese real estate market poses acute political risks for those responsible for managing its restructuring, underlining the urgent need for new financing.

In September, the group’s inability to make payments on wealth management products purchased by retail investors sparked protests outside its Shenzhen headquarters.

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