Ratings agency says Evergrande default ‘inevitable’

HONG KONG: Ratings agency ‘S&P Global Ratings’ says a demand that Chinese property giant Evergrande repay US$260 million shows that the issuer’s liquidity remains extremely weak.
“We continue to believe that a default by the Chinese developer looks inevitable,” the agency said in a statement.
However, the agency went on to say that the payment demand will not likely constitute a default event – yet.
“Evergrande seems to be disputing the payment request, possibly about whether the creditor can demand the payment right now, if it is an accelerated one,” it said.
“It also depends on whether Evergrande will be able to repay the full amount, if the company does have to repay as demanded.”

S&P says that Evergrande stated in an exchange filing that the demand was related to “its obligations under a guarantee,” and that it might lead to creditors “demanding acceleration of repayment.”
“Regardless, we believe that default looks inevitable for Evergrande,” S&P said.
“It faces huge bullet maturities in 2022, especially the U.S.-dollar bonds due in March and April 2022, totalling US$3.5 billion.
“The issuer does not seem to be making much progress in resuming construction, given its difficulties in obtaining new financing.
“That will likely continue to drag on the company’s contracted sales, the biggest and the most important cash inflow item for any Chinese developer.
“In addition, the asset disposals Evergrande has executed so far are not sufficient to cover its huge maturities.”