Beautiful Virgin Islands

Tuesday, Jun 03, 2025

Chinese real estate developer Evergrande defaults on debt

Highly leveraged property development company China Evergrande Group (EGRNY) has defaulted on its debt servicing, Fitch Ratings ruled. As of early afternoon on Dec. 10, 2021, S&P Global Ratings and Moody's had not issued rulings of their own on Evergrande.

The decision by Fitch Ratings to declare that Evergrande is in default stems from its assumption that two interest payments that were due on Dec. 6, 2021, when a grace period expired, were not made. More specifically, Fitch downgraded its rating of Evergrande to "restricted default," which means that the Hong Kong-based property development company has neither ceased operations nor commenced formal legal procedures such as filing for bankruptcy.

'A Technical Default for a Long Time Already'
Evergrande has total liabilities worth about $300 billion. Included in this figure are about $19 billion in bonds that are denominated in U.S. dollars and issued offshore, a larger amount than is outstanding from any other Chinese property development company.

"We should have been calling this a technical default for a long time already, but nobody dared," according to Alicia Garcia-Herrero, the chief economist for the Asia-Pacific region at France-based investment banking firm Natixis. She added: "China is not making it clear because there's no pressure to make it clear. Ratings [agencies] should be pushing. Some investors did push. Nobody wants to label this because they don't want to bear the consequences. Everybody's trying to increase what they can get out of it."

Garcia-Herrero also indicated that there is an advantage to Evergrande and its investors if the company can avoid being labeled officially as in default. Specifically, not being tagged in this fashion should reduce the cost at which Evergrande can restructure its debt.

'Default Looks Inevitable'
While S&P Global Ratings has not yet officially declared Evergrande to be in default, it has issued a warning. On Dec. 7, 2021, S&P issued a report asserting that "default looks inevitable for Evergrande."1

On Dec. 3, 2021, Evergrande had issued its own warning that it was struggling to meet its financial obligations and that it was planning to "actively engage with offshore creditors" about debt restructuring. Creditors had demanded payments of about $260 million.

Evergrande Chairman Sells Shares
Evergrande Group chairman Hui Ka Yan has sold 277.8 million shares in his company, reducing his ownership stake by slightly over 2% from 61.88% to 59.78%. He also sold 1.2 billion shares in November, his first sale since the company went public in 2009.

"Steps have been taken to enforce a security interest in the shares, or rights to such shares held as security against" Hui, according to the regulatory filing that disclosed the transaction.

'Drawn Out' Impact, Not a Shock
Garcia-Herrero of Natixis anticipates that, with help from the Chinese government, the problems encountered by Evergrande and other Chinese property developers will have have a negative impact on that country's economic growth that is drawn out over time, rather than a sharp and immediate shock. She also expects that the impact on the financial markets will be limited because the holders of Evergrande's debt are mainly "high net worth individuals, [who] are holding Evergrande to the maturity, to the restructuring point."

However, Japan-based global financial services firm Nomura Group warns in its 2022 global economic outlook report that measures being taken by the Chinese government to curb speculation in the property market, in tandem with its carbon neutrality drive, may "result in a vicious cycle of rising defaults and slower growth in North China."

Newsletter

Related Articles

Beautiful Virgin Islands
0:00
0:00
Close
British Fishing Boat Owner Fined €30,000 by French Authorities
Dutch government falls as far-right leader Wilders quits coalition
Harvard Urges US to Unfreeze Funds for Public Health Research
Businessman Mauled by Lion at Luxury Namibian Lodge
Researchers Consider New Destinations Beyond the U.S.
53-Year-Old Doctor Claims Biological Age of 23
Trump Struggles to Secure Trade Deals With China and Europe
Russia to Return 6,000 Corpses Under Ukraine Prisoner Swap Deal
Microsoft Lays Off Hundreds More Amid Restructuring
Harvey Weinstein’s Publicist Embraces Notoriety
Macron and Meloni Seek Unity Despite Tensions
Trump Administration Accused of Obstructing Deportation Cases
Newark Mayor Sues Over Arrest at Immigration Facility
Center-Left Candidate Projected to Win South Korean Presidency
Trump’s Tariffs Predicted to Stall Global Economic Growth
South Korea’s President-Elect Expected to Take Softer Line on Trump and North Korea
Trump’s China Strategy Remains a Geopolitical Puzzle
Ukraine Executes Long-Range Drone Strikes on Russian Airbases
Conservative Karol Nawrocki wins Poland’s presidential election
Study Identifies Potential Radicalization Risk Among Over One Million Muslims in Germany
Good news: Annalena Baerbock Elected President of the UN General Assembly
Apple Appeals EU Law Over User Data Sharing Requirements
South Africa: "First Black Bank" Collapses after Being Looted by Owners
Poland will now withdraw from the EU migration pact after pro-Trump nationalist wins Election
"That's Disgusting, Don’t Say It Again": The Trump Joke That Made the President Boil
Trump Cancels NASA Nominee Over Democratic Donations
Paris Saint-Germain's Greatest Triumph Is Football’s Lowest Point
OnlyFans for Sale: From Lockdown Lifeline to Eight-Billion-Dollar Empire
Mayor’s Security Officer Implicated | Shocking New Details Emerge in NYC Kidnapping Case
Hegseth Warns of Potential Chinese Military Action Against Taiwan
OPEC+ Agrees to Increase Oil Output for Third Consecutive Month
Jamie Dimon Warns U.S. Bond Market Faces Pressure from Rising Debt
Turkey Detains Istanbul Officials Amid Anti-Corruption Crackdown
Taylor Swift Gains Ownership of Her First Six Albums
Bangkok Ranked World's Top City for Remote Work in 2025
Satirical Sketch Sparks Political Spouse Feud in South Korea
Indonesia Quarry Collapse Leaves Multiple Dead and Missing
South Korean Election Video Pulled Amid Misogyny Outcry
Asian Economies Shift Away from US Dollar Amid Trade Tensions
Netflix Investigates Allegations of On-Set Mistreatment in K-Drama Production
US Defence Chief Reaffirms Strong Ties with Singapore Amid Regional Tensions
Vietnam Faces Strategic Dilemma Over China's Mekong River Projects
Malaysia's First AI Preacher Sparks Debate on Islamic Principles
White House Press Secretary Criticizes Harvard Funding, Advocates for Vocational Training
France to Implement Nationwide Smoking Ban in Outdoor Spaces Frequented by Children
Meta and Anduril Collaborate on AI-Driven Military Augmented Reality Systems
Russia's Fossil Fuel Revenues Approach €900 Billion Since Ukraine Invasion
U.S. Justice Department Reduces American Bar Association's Role in Judicial Nominations
U.S. Department of Energy Unveils 'Doudna' Supercomputer to Advance AI Research
U.S. SEC Dismisses Lawsuit Against Binance Amid Regulatory Shift
×