Chinese property giant Evergrande has defaulted on its debt to global investors, credit rating firm Fitch Ratings reported today.
- Fitch has downgraded Evergrande to “Restricted Default” after its deadline to pay interest due on two dollar-denominated bonds passed on Monday. The actual payments were due a month ago and the grace period expired on Monday. This means that Evergrande has failed to meet its financial obligations but has not formally filed for bankruptcy or entered into a liquidation process that would halt its operations. Evergrande has been avoiding default on its offshore bonds by paying overdue interest within the grace period until now.
- Evergrande’s total liabilities stand at over US$300 billion. Evergrande warned about the default at a stock exchange filing last week when it said that it may not have enough funds to meet its financial liabilities and is working with offshore creditors on a restructuring plan. According to the Fitch report, Evergrande also announced the formation of a Risk Management Committee made up of the firm’s senior management and representatives from Guangzhou state-owned enterprises and financial institutions to mitigate future risks on Monday. Analysts are worried about the disastrous impact of the collapse of a Fortune 500 company on not only the Chinese real estate market but also its precipitating effect on the global financial market.
- Following the announcement of Evergrande’s default, Bitcoin’s price took a tumble. While the price of Bitcoin was hovering around US$50,000 in the past few days, it has now slumped to US$49,083.27 at press time, according to CoinMarketCap data. Ethereum’s price, however, is holding steady above US$4,200 at the time of writing.