NEW DELHI: China’s second-largest property developer Evergrande, which had rattled markets worldwide late September, has defaulted for the first time.
This default was confirmed by Fitch Rating which on Thursday downgraded the company and its subsidiaries to “restricted default”. This means that the debt-laden firm has missed to meet its financial obligations.
“Fitch Ratings has downgraded to ‘RD’ (Restricted Default), from ‘C’, the Long-Term Foreign-Currency Issuer Default Ratings (IDR) of Chinese homebuilder China Evergrande Group and its subsidiaries, Hengda Real Estate Group Co, and Tianji Holding,” said Fitch in a note.
According to Fitch, “The downgrades reflect the non-payment of coupons due November 6, 2021 for Tianji’s $645 million 13% bonds and $590 million 13.75% bonds after the grace period lapsed on December 6. The non-payment is consistent with an ‘RD’ rating, signifying the uncured expiry of any applicable grace period, cure period or default forbearance period following a payment default on a material financial obligation,” Fitch said.
Evergrande has a total liability of whopping $300 billion. Economists and market analysts have worried for months that a default by the property giant could trigger a wider crisis in China’s property market and the financial market worldwide. According to equity market analysts, the default was in expected lines and it is unlikely to have any major impact on the Indian equity market which at present is going through a volatile phase.
VK Vijayakumar, cheif investment strategist at Geojit Financial Services, said, “Evergrande default is a known risk largely discounted by the market. Normally, known and expected factors do not create sharp market corrections. The Chinese central bank has been injecting liquidity into the market to preempt any possible credit market crisis. Presently, there is no possibility of this becoming a global contagion impacting markets. However, the situation has to be watched closely.”
Gaurav Garg, Head, Research, CapitalVia, said, “Evergrand’s default was much expected by the street, and I believe this will make an insignificant impact over the Indian equities. Global markets have seen mild effects of it as global futures are trading with mild losses since morning.”