S&P Labels Evergrande Defaulter; Shimao Cut: Evergrande Update
S&P Global cut Evergrande to “selective default” over its failure to make coupon payments.
(Bloomberg) -- China Evergrande Group was labeled a defaulter by S&P Global Ratings, while two credit-rating agencies downgraded Shimao Group Holdings Ltd. on Friday, highlighting the growing stress among Chinese property developers.
S&P Global cut Evergrande to “selective default” over its failure to make coupon payments by the end of a grace period earlier this month, a move that may trigger cross defaults on the developer’s $19.2 billion of dollar debt. S&P Global also withdrew its ratings on the group at Evergrande’s request.
Shimao Group lost its investment-grade status at Fitch Ratings, which lowered its assessment of the firm for the first time since 2012, citing weak sales and “unfavorable” financing conditions. That followed Moody’s Investors Service cutting Shimao Group deeper into junk on increased refinancing risks.
Record plunges in Shimao Group’s shares and bonds this week have triggered concern that contagion is spreading from junk-rated rivals including Evergrande and Kaisa Group Holdings Ltd. Its higher rating meant many of Shimao Group’s bonds are held by investors who have much lower tolerance for defaults than those who dabble in firms like Evergrande.
Shimao Group’s bonds pared earlier gains triggered by signs authorities were working to ease its cash crunch, while its shares closed 4.9% lower. China’s financial regulator is coordinating negotiations between Shimao Group and some trust firms for loan extensions, according to people familiar with the matter. Separately, the company wired 31.4 million yuan ($4.9 million) on Wednesday to repay a local note due Friday, according to an exchange filing.
Key Developments:
- Evergrande Declared in Default by S&P for Failed Coupon Payments
- China Evergrande’s Ratings Cut and Withdrawn by S&P
- Fitch Cuts Shimao Group to BB; on Rating Watch Negative
- Shimao Group Holdings Downgraded to Ba3 by Moody’s
- Shanghai Shimao Has Wired Funds for Full Bond Repayment Due Fri.
- Evergrande Boss Leads $46 Billion Wealth Loss in Worst Year Yet
- Singapore’s $744 Billion Fund Eyes Chinese Property Assets
- China Regulators in Talks With Shimao, Trusts on Loan Extension
- Chinese Estates Halted Pending H.K. Takeover Code Announcement
- Moody’s Downgrades Greenland Holding Group to Ba3
Evergrande’s Ratings Cut and Withdrawn by S&P (5:42 p.m. HK)
China Evergrande Group’s long-term rating was downgraded by S&P Global Ratings to SD from CC. S&P withdrew its ratings on Evergrande, its subsidiary Hengda Real Estate Group Co. Ltd., and Tianji Holding Ltd. at the group’s request.
S&P noted that Evergrande and its offshore financing arm Tianji failed to make coupon payments for their outstanding U.S.-dollar senior notes and the grace periods for payments have also lapsed. Fitch Ratings was the first to declare Evergrande in default on Dec. 9.
Fitch Cuts Shimao to Junk (3:54 p.m. HK)
Fitch downgraded Shimao Group’s rating to BB, from BBB-. Ratings have been placed on watch negative.
“Negative news flow related to the company has diminished investor confidence, which could constrain Shimao’s refinancing channels and add to liquidity pressure,” Fitch said in a statement.
Shimao Downgraded to Ba3 by Moody’s (2:30 p.m. HK)
Shimao Group’s long-term rating was downgraded by Moody’s to Ba3 from Ba1. Ratings remain on watch negative.
“The rating downgrade reflects Shimao’s increased refinancing risk due to its constrained funding access and sizable debt maturities over the next 6-12 months,” said Celine Yang, an analyst at Moody’s.
Singapore Fund Eyes Chinese Property Assets (5:00 a.m. HK)
Singapore’s $744 billion sovereign wealth fund sees potential opportunities to do deals and buy debt in China’s battered real estate sector, confident Beijing won’t let things “spiral out of control” following several defaults.
“We continue to have confidence that it is a good investment market for us,” said Lim Chow-Kiat, chief executive officer of GIC Pte. “We are not moving away from being involved in the Chinese real estate market.”
Evergrande Boss Leads $46 Billion Wealth Loss (3:00 a.m. HK)
The rout in developer shares this year means the richest bosses behind China’s property firms have lost more than $46 billion combined this year, according to the Bloomberg Billionaires Index, a ranking of the world’s 500 richest people that started in 2012. Evergrande founder Hui Ka Yan’s wealth alone has plunged by $17.2 billion, one of the biggest slumps for 2021.
Once Asia’s second-richest person with a $42 billion fortune, Hui is now worth just $6.1 billion as shares of units of his empire have tumbled and the government urged him to use his personal wealth to help repay investors. Earlier this month, China’s central bank governor said the Evergrande tumult had to be dealt by the market, signaling that Beijing wouldn’t bail out the world’s most-indebted developer as it struggles with more than $300 billion in liabilities.
Regulators in Talks With Shimao on Loan Extension (7:08 p.m. HK)
China’s financial regulator is coordinating negotiations between Shimao Group Holdings Ltd. and some trust firms for loan extensions, according to people familiar with the matter.
Officials from the China Banking and Insurance Regulatory Commission helped arrange talks between Shimao and trust firms including Guotong Trust Co. and China Minsheng Trust Co., the people said, asking not to be named discussing a private matter.
Evergrande Told to Prioritize Paying Workers (5:52 p.m. HK)
China Evergrande Group is prioritizing payments to migrant workers and suppliers as regulators urge the cash-strapped developer to head off any risk of social unrest, according to people familiar with the matter.
Authorities are particularly focused on making sure payrolls are met before the Lunar New Year holidays starting Feb. 1, when thousands of migrant construction workers are due to reunite with their families, the people said, asking not to be named discussing private conversations. Evergrande had 163,119 employees as of June 30 and indirectly supports the livelihoods of many more through its vendors.
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