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After months of struggling to pay down its massive debts, China Evergrande Group has defaulted, a ratings agency said Thursday.

Fitch Ratings said in a statement that it had placed the embattled home builder and two of its subsidiaries, Hengda Real Estate Group and Tianji Holding, into “restricted default.” The designation means it has missed a debt payment but hasn’t entered into bankruptcy or other process that would suspend operations.

The default was largely expected by analysts and investors, probably blunting its effect on global markets. The major U.S. stock indexes, all coming off a three-day rally, were down slightly in afternoon trading Thursday.

“Investors aren’t reacting much because this has been baked in for a long time,” said Nick Lardy, senior fellow with the Peterson Institute for International Economics. “It’s a slow-motion car-crash, and I think we’ll see more coming because they have a lot of debt that’s due over the next year.”

Another Chinese developer, Kaisa Group Holdings, also was given a restricted default rating Thursday. It failed to repay senior notes totaling roughly $400 million that were due Tuesday, Fitch said in a statement. Its shares were suspended from the Hong Kong Stock Exchange on Wednesday, according to Reuters.

Evergrande, founded in 1996, rode its way to the top of China’s housing boom while building up a mountain of debt. Its founder, Xu Jiayin, briefly became China’s wealthiest business executive in 2017, and Evergrande the world’s most valuable real estate company in 2018. As of June 30, he and his wife, Ding Yumei, together owned 77% of the shares, according to a September investor note from the ratings agency Moody’s.

Fitch says it’s one of China’s three largest developers by contracted sales. The company says it has more than 200,000 employees and supports about 3.8 million jobs. Its assets are worth approximately 2.3 trillion yuan, according to the Associated Press, or $360.6 billion.

But in recent months, the company has been staggering under the weight of $300 billion in liabilities. In September, Moody’s predicted Evergrande would be unable to generate enough cash flow to meet its debt and operating needs over the next 12 months. On Friday, Evergrande said that it had received a demand to make good on a $260 million obligation but that it couldn’t guarantee it would be able to keep up with its debts.

Fitch said Thursday that Evergrande provided no indication of how it will settle the debts or whether it intends to do so at all. It also said the company did not respond to its request for confirmation of payment after the 30-day grace period on the coupon payments lapsed Dec. 6.

“We are therefore assuming they were not paid,” Fitch said.

The Chinese developer’s precarious finances had raised alarms about a worst-case scenario, one in which its collapse could snowball across the global financial sector as Lehman Brothers did in 2008. Those fears have been tempered, partly because of Beijing’s signals that it will prevent wider fallout.

Lardy, the Peterson Institute senior fellow, said he sees little commonality between Evergrande’s problems and the mortgage crisis that hit the United States more than a decade ago. China’s lenders are financially responsible for whether home loans are repaid, making it harder for them to spread risk across the financial system as was the case before the 2007-2008 crisis in the United States.

The bigger risk for China is that people will lose confidence in the housing market if paid-for houses aren’t delivered.

Evergrande has fueled much of its expansion by preselling apartments, leaving it with hundreds of thousands of unfinished projects that it will need to complete or offload. The company has been scrambling to sell those assets to free up cash.

“The government is very concerned about whether the millions of people who have bought houses from Evergrande will get their houses,” Lardy said. “If that doesn’t happen, confidence in the property sector will erode.”

Fortunately, he says, China has more than 90,000 property developers, so even a large default is likely to be viewed as little more than a drop in the bucket. And even a worst-case scenario in China is unlikely to rattle global markets the way the Lehman collapse did. “I think this is primarily a risk to China,” Lardy said.

China’s central bank has rushed to assure the public that it can contain any broader damage to the nation’s economy. On Thursday, Chinese central banker Yi Gang said Evergrande’s problems are not expected to cause lasting harm, according to a transcript referenced by the Associated Press.

“The short-term risk of individual real estate companies will not affect the normal financing function of the medium- and long-term market,” Yi said, according to the AP.

Scott Kennedy, an expert on Chinese economics with the Center for Strategic and International Studies, says Evergrande is effectively being drawn down through a government-managed process.

The Chinese government “is aiming for [Evergrande] to basically die a gradual death that is managed in a way that doesn’t have a huge impact on the rest of the Chinese economy and for us, as well,” Kennedy said.

It’s possible that some core of the company will remain once its least profitable elements are sold off, Kennedy said, but “I don’t think there’s any option that keeps the company in the recognizable form that we see now.”

Evergrande currently trades over the counter at about 23 cents per share. The stock price is down 85% in the past six months.

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