The default of China’s Evergrande was always just a matter of when rather than if: with that, come Thursday morning, Fitch Ratings officially slapped Evergrande and rival real estate company Kaisa Group with default status, after the real estate developers failed to make US dollar bond payments before the grace period expired.
Overnight, Fitch formally downgraded Evergrande into default status, following a months-long financial theatrics scene that had global markets tightly gripped to the edge of their seats. The real estate developer had failed to make US dollar-denominated coupon payments— totalling $82.5 million— ahead of the 30-day grace period, which expired on Monday. The ratings agency said the developer did not confirm the repayment, and as such, it was assumed it was not paid.
The official default marks the beginning of the end for China’s largest real estate company, which back in June revealed it was sitting on $300 billion in debt— the largest amount of debt of any private company in the world. Evergrande’s non-repayment has prompted an “event of default” on its other US dollar denominated notes, which will now make them due immediately in the event that at least 25% of their holders decide so.
Likewise, Kaisa faces the same fate, as it missed $400 million in offshore notes that were due for repayment on Tuesday. As Refinitiv data shows, the company has $2.8 billion in notes due in 2022, and approximately another $3.2 billion due each year between 2023 and 2025.
Information for this briefing was found via Fitch Ratings and the companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
