Fitch Downgrades China Evergrande's Credit Rating from CC to C... "Facing Insolvency" (Comprehensive)

Pitch "Facing Insolvency... Investment Unqualified"
Reflecting Nonpayment of Interest on Dollar-Denominated Bonds

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Kim Suhwan] International credit rating agency Fitch has downgraded the credit rating of Evergrande Group (恒大·Evergrande), China's second-largest real estate company facing a liquidity crisis, from 'CC' to 'C'.

On the 29th, Fitch released a report lowering the long-term foreign currency issuer default rating (IDR) of Evergrande and its affiliates to 'C', stating, "The downgrade reflects the situation where interest on dollar bonds has not been paid."

The 'C' rating, just above 'DDD' which corresponds to default, means 'junk' status and indicates that the company is facing insolvency.

Earlier, on the 7th, international credit rating agency Moody's had downgraded Evergrande's corporate credit rating (CFR) from 'Caa1' to 'Ca'.

'Ca' generally implies a default event with a low prospect of recovering principal or interest.

Currently, Evergrande Group's debt amounts to $302 billion (approximately 358 trillion KRW). On the 23rd, Evergrande was supposed to pay interest on dollar bonds (about 99.3 billion KRW) and yuan bonds (about 42.5 billion KRW). However, Evergrande reportedly paid only the interest on yuan bonds and failed to pay interest on dollar bonds.

As of that day, Evergrande has not disclosed the timing for payment of the unpaid dollar bond interest. If interest is not paid within the 30-day grace period starting from the 23rd, Evergrande will face a default situation.

On this day, Evergrande is required to pay an additional $45.2 million (approximately 53.5 billion KRW) in dollar bond interest.

According to Bloomberg's tally, Evergrande Group is expected to face bond maturities totaling $7.4 billion (approximately 8.8 trillion KRW) by next year.

The market is closely watching the escalating bankruptcy risk of Evergrande and its potential impact on the Chinese economy. If Evergrande, which holds the largest debt burden among global real estate companies (about 358 trillion KRW), actually defaults, it could pose a potential threat to the global financial market.

Earlier that morning, Evergrande announced it would sell a 19.93% stake in China Shengjing Bank held by its subsidiary. If this sale is completed, Evergrande is expected to secure about 1.8 trillion KRW in funds.

Meanwhile, Bloomberg reported that a company named Jumbo Fortune, headquartered in Hong Kong, has bonds worth $260 million (approximately 300 billion KRW) maturing on October 3rd. Citing sources, the media reported that some investors holding bonds issued by this company are forming a committee to recover the bonds, claiming that the bonds are guaranteed by Evergrande Group and its affiliates.

Bloomberg stated, "This bond maturity will be another major test for Evergrande Group," adding, "Evergrande is already failing to make timely payments to banks and regional investment product investors."

This content was produced with the assistance of AI translation services.