Evergrande, the embattled Chinese property developer, has defaulted on its debt, according to Fitch Ratings. CNN Business reported that the credit rating agency on Thursday downgraded the company and its subsidiaries to “restricted default,” meaning that the firm has failed to meet its financial obligations.
Fitch said the downgrade reflects the company’s inability to pay interest due earlier this week on two dollar-denominated bonds. The payments were due a month ago, and grace periods lapsed Monday. Fitch noted that Evergrande made no announcement about the payments, nor did it respond to inquiries from the ratings agency. “We are therefore assuming they were not paid,” Fitch said.
The NY Post stated, But Evergrande is faltering in China, where the Communist Party keeps a firm hand on corporate meltdowns to keep them from spreading out of control. With Evergrande, the risk is high:
A sudden unwinding of the company could hit the country’s financial system or, potentially, the many homeowners in China who have already paid for Evergrande apartments that are yet to be built.
The company’s largely resigned investors are now waiting to see what Evergrande, under the advice of a group of financial types tied to the state, will do next.
“We all expected that Evergrande was not going to be able to pull a rabbit out of their hat,” said Michel Löwy, chief executive of SC Lowy, an investment firm that has a small position in Evergrande bonds. “Now, the ball is in their court to come up with some form of restructuring proposal,” he said.
Evergrande did not respond to a request for comment. Fitch said the company had not responded to its own request for confirmation about whether it had met or missed an $82 million payment to bondholders due on Monday, which prompted the ratings firm’s Thursday move.
