Banking

S&P downgrades China Evergrande again to 'CCC'

Credit: REUTERS/Bobby Yip

S&P Global has downgraded the ratings of heavily indebted developer China Evergrande Group and its subsidiaries, citing an escalating risk of non-payment of debt, its second downgrade in less than two weeks.

Adds details on rating, background, share price

SHANGHAI, Aug 6 (Reuters) - S&P Global has downgraded the ratings of heavily indebted developer China Evergrande Group 3333.HK and its subsidiaries, citing an escalating risk of non-payment of debt, its second downgrade in less than two weeks.

S&P downgraded Evergrande and subsidiaries Hengda Real Estate Group Co Ltd and Tianji Holding Ltd by two notches to "CCC" from "B-", and lowered the long-term issue rating on U.S. dollar notes issued by Evergrande and guaranteed by Tianji to "CCC-" from "CCC+", the agency said in a statement on Thursday evening.

The move followed its two-notch downgrades last Monday. Moody's and Fitch also took similar actions in the past two weeks.

"We lowered the ratings because Evergrande's liquidity position is eroding more quickly and by more than we previously expected," the rating agency said.

It added the firm's nonpayment risk is escalating not only for the substantial public bond maturities in 2022, but also for its bank and trust loans and other debt liabilities over the next 12 months.

S&P estimated Evergrande has over 240 billion yuan ($37.14 billion) of bills and trade payables from contractors to settle over the next 12 months, of which around 100 billion yuan is due within 2021.

Increasing suppliers and contractors are suing Evergrande over late payments, and S&P said Evergrande might be persuading them to accept physical properties under presales as payments, citing market information, which also points to a deterioration of the company's liquidity position.

Shares of Evergrande in Hong Kong dropped as much as 7% on Friday morning to the lowest since January 2017.

Worries over the developer's financial health intensified after Evergrande admitted in June it had not paid some commercial paper on time, and news last week that a Chinese court had frozen a $20 million bank deposit held by the firm at the request of Guangfa Bank.

($1 = 6.4628 Chinese yuan renminbi)

(Reporting by Andrew Galbraith in Shanghai and Clare Jim in Hong Kong; Editing by Muralikumar Anantharaman and Stephen Coates)

((Andrew.Galbraith@tr.com; +86 21 2083 0079; Reuters Messaging: andrew.galbraith.thomsonreuters.com@reuters.net ; Twitter: https://twitter.com/apgalbraith))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Latest Personal Finance Videos

Reuters

Reuters, the news and media division of Thomson Reuters, is the world’s largest international multimedia news provider reaching more than one billion people every day. Reuters provides trusted business, financial, national, and international news to professionals via Thomson Reuters desktops, the world's media organizations, and directly to consumers at Reuters.com and via Reuters TV.

Learn More