China Evergrande Group defaults for first time
The property developer’s rating was cut to ‘restricted default’ by Fitch after it failed to meet two coupon payments
China Evergrande Group has been labelled a defaulter for the first time after its rating was cut to ‘restricted default’ by Fitch as it failed to meet two coupon payments that had fallen due following the expiry of a grace period on Monday.
Fitch said the property developer, which has debts of over US$300bn, did not respond to its request for confirmation on the payment and it is therefore assuming the payment was not made.
The downgrade may trigger cross defaults on Evergrande’s US$19.2bn of dollar debt, according to Bloomberg.
Evergrande said in a filing on 3 December that it plans to “actively engage” with offshore creditors on a restructuring plan.
The company is planning to include all its offshore public bonds and private debt obligations in the restructuring, people familiar with the matter told Bloomberg.
“The downgrade may not have an overt or immediate impact on the Chinese process, but may subtly increase pressure on the company (and regulators) to quickly reveal initial restructuring proposals,” said Brock Silvers, chief investment officer at Kaiyuan Capital in Hong Kong.
Last week, Guangdong’s provincial government said it was sending a team to Evergrande to supervise risk management and strengthen internal control.
The company’s new seven-member risk committee includes senior managers from Guangdong state-owned enterprises and China Cinda Asset Management Co., the nation’s largest bad-debt manager, Bloomberg reported. Another is from a law firm, while only two members are from Evergrande.
Fitch also downgraded Kaisa Group Holdings Ltd. to ‘restricted default’, citing its failure to repay a US$400mln dollar bond that matured Tuesday.