London Daily

Focus on the big picture.
Thursday, Jul 10, 2025

Chinese real estate developer Evergrande defaults on debt

Highly leveraged property development company China Evergrande Group (EGRNY) has defaulted on its debt servicing, Fitch Ratings ruled. As of early afternoon on Dec. 10, 2021, S&P Global Ratings and Moody's had not issued rulings of their own on Evergrande.

The decision by Fitch Ratings to declare that Evergrande is in default stems from its assumption that two interest payments that were due on Dec. 6, 2021, when a grace period expired, were not made. More specifically, Fitch downgraded its rating of Evergrande to "restricted default," which means that the Hong Kong-based property development company has neither ceased operations nor commenced formal legal procedures such as filing for bankruptcy.

'A Technical Default for a Long Time Already'
Evergrande has total liabilities worth about $300 billion. Included in this figure are about $19 billion in bonds that are denominated in U.S. dollars and issued offshore, a larger amount than is outstanding from any other Chinese property development company.

"We should have been calling this a technical default for a long time already, but nobody dared," according to Alicia Garcia-Herrero, the chief economist for the Asia-Pacific region at France-based investment banking firm Natixis. She added: "China is not making it clear because there's no pressure to make it clear. Ratings [agencies] should be pushing. Some investors did push. Nobody wants to label this because they don't want to bear the consequences. Everybody's trying to increase what they can get out of it."

Garcia-Herrero also indicated that there is an advantage to Evergrande and its investors if the company can avoid being labeled officially as in default. Specifically, not being tagged in this fashion should reduce the cost at which Evergrande can restructure its debt.

'Default Looks Inevitable'
While S&P Global Ratings has not yet officially declared Evergrande to be in default, it has issued a warning. On Dec. 7, 2021, S&P issued a report asserting that "default looks inevitable for Evergrande."1

On Dec. 3, 2021, Evergrande had issued its own warning that it was struggling to meet its financial obligations and that it was planning to "actively engage with offshore creditors" about debt restructuring. Creditors had demanded payments of about $260 million.

Evergrande Chairman Sells Shares
Evergrande Group chairman Hui Ka Yan has sold 277.8 million shares in his company, reducing his ownership stake by slightly over 2% from 61.88% to 59.78%. He also sold 1.2 billion shares in November, his first sale since the company went public in 2009.

"Steps have been taken to enforce a security interest in the shares, or rights to such shares held as security against" Hui, according to the regulatory filing that disclosed the transaction.

'Drawn Out' Impact, Not a Shock
Garcia-Herrero of Natixis anticipates that, with help from the Chinese government, the problems encountered by Evergrande and other Chinese property developers will have have a negative impact on that country's economic growth that is drawn out over time, rather than a sharp and immediate shock. She also expects that the impact on the financial markets will be limited because the holders of Evergrande's debt are mainly "high net worth individuals, [who] are holding Evergrande to the maturity, to the restructuring point."

However, Japan-based global financial services firm Nomura Group warns in its 2022 global economic outlook report that measures being taken by the Chinese government to curb speculation in the property market, in tandem with its carbon neutrality drive, may "result in a vicious cycle of rising defaults and slower growth in North China."

Newsletter

Related Articles

0:00
0:00
Close
Severe Heatwave Claims 2,300 Lives Across Europe
NVIDIA Achieves Historic Milestone as First Company Valued at $4 Trillion
Declining Beer Consumption Signals Cultural Shift in Germany
Linda Yaccarino Steps Down as CEO of X After Two Years
US Imposes New Tariffs on Brazilian Exports Amid Political Tensions
Azerbaijan and Armenia are on the brink of a historic peace deal.
Emails Leaked: How Passenger Luggage Became a Side Income for Airport Workers
Polish MEP: “Dear Leftists - China is laughing at you, Russia is laughing, India is laughing”
BRICS Expands Membership with Indonesia and Ten New Partner Countries
Weinstein Victim’s Lawyer Says MeToo Movement Still Strong
U.S. Enacts Sweeping Tax and Spending Legislation Amid Trade Policy Shifts
Football Mourns as Diogo Jota and Brother André Silva Laid to Rest in Portugal
Labour Expected to Withdraw Support for Special Needs Funding Model
Leaked Audio Reveals Tory Aide Defending DEI Record
Elon Musk Founds a Party Following a Poll on X: "You Wanted It – You Got It!"
London Stock Exchange Faces Historic Low in Initial Public Offerings
A new online platform has emerged in the United Kingdom, specifically targeting Muslim men seeking virgin brides
Trump Celebrates Independence Day with B-2 Flyover and Signs Controversial Legislation
Boris Johnson Urges Conservatives to Ignore Farage
SNP Ordered to Update Single-Sex Space Guidance Within Days
Starmer Set to Reject Calls for Wealth Taxes
Stolen Century-Old Rolls-Royce Recovered After Hotel Theft
Macron Presses Starmer to Recognise Palestinian State
Labour Delayed Palestine Action Ban Over Riot Concerns
Swinney’s Tax Comments ‘Offensive to Scots’, Say Tories
High Street Retailers to Enforce Bans on Serial Shoplifters
Music Banned by Henry VIII to Be Performed After 500 Years
Steve Coogan Says Working Class Is Being ‘Ethnically Cleansed’
Home Office Admits Uncertainty Over Visa Overstayer Numbers
JD Vance Questions Mandelson Over Reform Party’s Rising Popularity
Macron to Receive Windsor Carriage Ride in Royal Gesture
Labour Accused of ‘Hammering’ Scots During First Year in Power
BBC Head of Music Stood Down Amid Bob Vylan Controversy
Corbyn Eyes Hard-Left Challenge to Starmer’s Leadership
London Tube Trains Suspended After Major Fire Erupts Nearby
Richard Kemp: I Felt Safer in Israel Under Attack Than in the UK
Cyclist Says Police Cited Human Rights Act for Riding No-Handed
China’s Central Bank Consults European Peers on Low-Rate Strategies
AI Raises Alarms Over Long-Term Job Security
Saudi Arabia Maintains Ties with Iran Despite Israel Conflict
Musk Battles to Protect Tesla Amid Trump Policy Threats
Air France-KLM Acquires Majority Stake in Scandinavian Airlines
UK Educators Sound Alarm on Declining Child Literacy
Shein Fined €40 Million in France Over Misleading Discounts
Brazil’s Lula Visits Kirchner During Argentina House Arrest
Trump Scores Legislative Win as House Passes Tax Reform Bill
Keir Starmer Faces Criticism After Rocky First Year in Power
DJI Launches Heavy-Duty Coaxial Quadcopter with 80 kg Lift Capacity
U.S. Senate Approves Major Legislation Dubbed the 'Big Beautiful Bill'
Largest Healthcare Fraud Takedown in U.S. History Announced by DOJ
×