Two real estate companies in China have officially defaulted on dollar bonds: China Evergrande Group and Kaisa Group Holdings Ltd. Fitch lowered its Long-Term Foreign Currency Default Rating (IDR) from ‘C to ‘RD (Restricted Default)), citing the plight of Evergrande. Similarly, its subsidiaries have also been downgraded. The downgrades reflect the non-payment of coupons due on November 6, 2021 for Tianji’s 645 million USD 13% bonds and 590 million USD 13.75% bonds after the grace period ends on 6 December.
If we look at the determinants of the rating; Uncertainty over non-payment of coupons, cross-default and restructuring is prominent. Regarding cross default; Tianji is a limited subsidiary of Evergrande and the non-payment triggered a default on Evergrande’s bonds.
Meanwhile, China’s central bank has taken further steps to limit the yuan’s strength, setting the weakest reference rate on estimates compiled since 2018, a day after policymakers raised the FX reserve requirement for banks for the second time this year. The FX reserve requirement ratio for financial institutions will be increased to 9% from the current 7% effective December 15.
Kaynak Tera Yatırım-Enver Erkan
Hibya Haber Ajansı
Kaynak: Hibya Haber Ajansı
