S&P downgrades Chinese developer Sinic after debt default
Shanghai, China, Oct 20 (EFE).- Credit-rating agency Standard & Poor’s (S&P) Wednesday downgraded Sinic after the Chinese developer failed to repay the debt of $250 million and interest on offshore bonds.
S&P lowered the credit rating of the developer to “selective default,” only a notch above the lowest on its scale.
The agency said the real estate firm defaulted despite liquidity of about $2.1 billion until June end.
Sinic, which has about $1 billion in debt issued through offshore bonds, had said on Oct.12 that it did not have “sufficient financial resources” to make the payments due on Oct.18.
Sinic shares at the Hong Kong stock exchange have remained frozen since Sep.20 when the stock plunged 87 percent after a creditor demanded the payment of $75 million and the incurred interest.
S&P said the default would speed up repayment requests from lenders.
It expected Sinic’s “exceptionally weak liquidity to continue” as more defaults were likely to occur for the next 12 months.
The snowballing crisis of the indebted developer Evergrande has put the eyes of international investors on the Chinese real estate market.
The fears that the Evergrande crisis has taken a shape of contagion in the sector grew after reports that other firms like Fantasia Holdings, Xinyuan Real Estate, and Modern Land were also struggling to pay their debts.
The credit-rating agency said the crisis was not limited to the real estate sector in China.
An S&P report published Tuesday warned that Chinese companies had accumulated almost a third (31 percent) of global corporate debt of about $27 trillion.
“The leverage levels of China’s corporate sector are significantly above the global average. It is a $27 trillion problem that is increasingly getting the attention of Beijing,” the S&P report said.
It indicated that the debt-to-GDP leverage ratio of Chinese companies is 159 percent, “one of the highest in the world.” EFE