Chinese real estate giant Evergrande Group, which is sitting on a $310 billion mountain of debt, has been labelled a defaulter by Fitch Ratings, after it failed to meet two coupon payments worth over $1.2 billion past the grace period.
Fitch Ratings announced that the company, one of China’s largest real estate firms, had been downgraded to “RD” (Restricted Default) from its “C” rating.
Credit ratings are indications of the likelihood of repayment in accordance with the terms of the issuance.
Another Chinese company, Kaisa, also saw its rating downgraded to default on account of $400 million worth of unpaid bonds.
China had earlier sought to allay fears that such a default would chill lending markets and cause global shock waves, with an expansion of the monetary supply for lending via a reduction of the amount of money banks need to hold in reserve.
Developers have been racing to pay off debt since Beijing lowered limits on their use of borrowed money last year. Weaker real estate activity depressed economic growth to an unexpectedly low 4.9 per cent over a year earlier in the last quarter.
The People's Bank said it wants to “support development of the real economy.” It said the reserve cut was no change in “prudent monetary policy.”
Beijing is likely to launch a two-track strategy of pumping money into credit markets while trying to prevent home prices from crashing if developers dump apartments in a “fire sale” to raise cash, ING economist Iris Pang told AP.
With inputs from PTI
