Fitch downgrades China’s Evergrande, Kaisa after offshore debt default
Shanghai, China, Dec 9 (EFE).- Two Chinese real estate firms, Evergrande and Kaisa, have defaulted on foreign debt, prompting Fitch Ratings on Thursday to downgrade its rating of both to Restricted Default (RD).
This rating, the penultimate on the Fitch scale, means a company has defaulted but has not ceased to operate. The bottom rating of D, or Default, signals a company is in the process of liquidation or closure.
Fitch Ratings said China Evergrande Group subsidiary Tianji Holdings Limited, had failed to pay off interest owed on two lots of foreign bonds as a grace period came to an end Monday. The reported sum owed was $82.5 million.
“The downgrades reflect the non-payment of coupons due 6 November 2021 for Tianji’s $645 million 13% bonds and $590 million 13.75% bonds after the grace period lapsed on 6 December,” the agency said.
Although the company has offered few details, its chairman warned last Friday that the group could not guarantee it had the funds to pay $260 million demanded by creditors, which some observers interpreted as a thinly veiled warning that Evergrande was about to default on its dollar debt.
The company said it would “actively engage” with its offshore creditors.
Evergrande announced in June that it was dealing with liabilities totaling some $300 billion amid fears that its potential collapse could send shockwaves through the Chinese economy. The latest news also raised the prospect of a cross-default, whereby failure to repay one creditor prompts others to demand the repayment of loans.
In a separate statement Thursday, Fitch Ratings cut its evaluation of the property development firm Kaisa Group Holdings after it failed to pay $400 million senior notes due on Tuesday. Kaisa, which froze trading on the Hong Kong stock exchange on Wednesday, unsuccessfully tried to negotiate a grace period for the payment deadline.
According to financial news outlet Caixin, Evergrande’s offshore debts total $19 billion while Kaisa’s stands at $11.2 billion. EFE