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However, S&P Global has noted that China Evergrande’s default is “inevitable”.
EVERGRANDE DEFAULTS UPGRADE
Other rating agencies, such as Moody’s and S&P Global, have not been so quick to upgrade their status of China Evergrande. Interestingly, China Evergrande is the twelfth Chinese real estate firm to default on bonds in 2021 and by far the largest to do so. Perhaps fortuitously, it was the failure by China Evergrande to make interest payments to this same group of investors that prompted Fitch Ratings to upgrade the company’s status to “restricted default” on Dec. Off-shore bondholders will likely be the least prioritized of the company’s investors when receiving interest payments or reparations. One such unlucky purchaser of China Evergrande corporate bonds, among others, is off-shore investors. Put simply, the cash flow of the company, severely dampened by the cooling Chinese housing market, is not enough for it to service interest payments to those from which it borrowed funds, typically in the form of interest-bearing corporate bonds. (It is believed that China Evergrande could have an additional US $150 billion in debt, off its official financial books). The company has more than $300 billion in debt that, as it warned the market back in September, it believed would be difficult for it to service. China Evergrande (OTC: EGRNY), the second-largest real estate developer in China, has been narrowly dodging default for months.