The Chinese real estate company Evergrande, whose liquidity problems have shaken the country’s credit markets, defaults for the first time in dollars.
Evergrande’s long-term foreign currency credit rating was downgraded to a “restricted default” by Fitch Ratings due to non-payment of interest on dollar-denominated bonds, which expired on December 6.
According to foreign news agencies, the development marks the beginning of the end for the vast real estate empire started 25 years ago by founder Hui Ka Yan, and begins a long battle over who will be paid out of what is left.
It is also the biggest challenge – so far – for the government government and its efforts to prevent a debt crisis in the real estate sector, to take on wider dimensions.
Evergrande, which revealed more than $ 300 billion in total liabilities by June, said in a brief statement to authorities on December 3 that it planned to “actively engage” with international investors in a restructuring plan.
According to Bloomberg sources, the company plans to include all its international obligations, in government and corporate bonds, in the restructuring.
Evergrande $ 19.2 billion bondholders are facing deep haircuts as the company restructures its huge unbalanced government balance sheet – a process that is going to be long, controversial and potentially dangerous for Asia’s largest economy.
Some of the Evergrande dollar bonds are trading at a very low level, around 20 cents on the dollar.
The key for these bondholders is whether the company can accelerate home and asset sales.
Also, the government seems to be deciding to play an active role in the development of the case. President Hui was summoned by the government of his southern Guangdong province last week after the company said it planned to work with creditors on a restructuring plan.
Authorities will send a task force to press the company to manage the risks, as well as to strengthen internal controls and ensure normal operations.
Source From: Capital