September 9, 2021

China Evergrande bond falls more than 20%, trading paused

By ellen

SHANGHAI (REUTERS, BLOOMBERG) – China Evergrande’s Shenzhen-traded January 2023 bond fell more than 20 per cent in early trade on Thursday (Sept 9), prompting a halt in trading, the Shenzhen Stock Exchange said in a statement.

Financial intelligence provider REDD reported on Wednesday that Evergrande plans to suspend interest payments on loans from two banks due Sept 21. and asked a lender to wait for instructions about an extension plan.

Fitch Ratings had earlier slashed Evergrande’s credit rating deeper into junk, to CC from CCC+. “The downgrade reflects our view that a default of some kind appears probable,” Fitch analysts wrote in a note. The move came a day after Moody’s Investors Service cut Evergrande’s credit rating by three notches to Ca, its third downgrade of the real estate giant since June.

The world’s most indebted developer has become one of the biggest financial worries in China, given its teetering pile of US$305 billion (S$410.7 billion) in liabilities to banks, shadow lenders, companies, investors, vendors and home buyers. Investor concerns about a possible payment failure at Evergrande have prompted dramatic declines in the firm’s bonds in recent weeks and triggered fears about contagion risk in the broader credit market.

The company did not immediately respond to request for comment about Fitch’s downgrade or the report of the planned suspension of loan interest payments.

Evergrande itself last week warned of default risks if its efforts to raise cash fall short. The company separately said on Friday its contracted sales in August, including those to suppliers and contractors to offset payments, dropped 26 per cent compared with a year ago.