The ratings of heavily indebted Chinese developer Evergrande Group and its subsidiaries was downgraded to “CCC-“, down from ‘CCC+” by S&P Global. This is its second downgrade in less than two weeks.
Evergrande along with its subsidiaries Hengda Real Estate Group Co Ltd and Tianji Holding Ltd were downgraded by S&P Global by two notches. The ratings agency also lowered the Chinese company’s long-term issue rating on U.S. dollar notes.
“We lowered the ratings because Evergrande’s liquidity position is eroding more quickly and by more than we previously expected,” said S&P Global.
It went on to add, the risk of nonpayment by the Chinese company’s is significant given its substantial public bonds that are set to mature in 2022.
According to S&P’s estimate, Evergrande has more than $37.14 billion (240 billion yuan) in bills and trade payables from contractors which it has to settle over the next 12 months, of which around 100 billion yuan is scheduled for repayment for within 2021.
The number of contractors and suppliers suing the company has jumped following late payments, said S&P while adding, Evergrande may persuade them to accept physical properties under presales as payments, citing market information, which also points to a deterioration of the company’s liquidity position.
On Friday, Evergrande’s shares in Hong Kong dropped by 7% to its January 2017 nadir.
Investor worries on its financial health intensified after Evergrande’s admission in June that it had yet to pay commercial paper on time; last week a Chinese court froze a $20 million bank deposit held by the firm at the request of Guangfa Bank.
($1 = 6.4628 Chinese yuan renminbi)