Real estate company

Concern in China over the deterioration of the credit of real estate company Evergrande

Beijing, Sept. 10 (EFE) .- Chinese real estate company Evergrande suffered two downgrades this week of its debt rating by the agencies Fitch and Moody’s, raising fears of bankruptcy within the company, which owes around 305 billion dollars.

Moody’s lowered the company’s valuation on Tuesday, with Fitch doing the same a day later by downgrading the rating from CCC + to CC, warning of a “high risk of default.”

China Chengxin, one of China’s major credit bureaus, also downgraded Evergrande’s debt rating from AAA to AA, placing it on a watch list for possible further downgrades in the future.

The group, founded in 1996, has accumulated debts to pay for its real estate projects and their extension to other sectors such as health services, electric vehicles and even sport.

However, the drop in the value of new home sales since the start of the year and Beijing’s new real estate regulations, aimed at curbing speculation, have put Evergrande in difficulty.

In late December, in hopes of controlling rising house prices, new regulations were approved that limit lending to large real estate developers, some of whom, like Evergrande, were already racking up large debts.

Since early July 2020 and due to new regulations, declining revenues and profits between January and June of this year and the poor performance of its real estate business, Evergrande shares on the Hong Kong Stock Exchange have lost more than 84% of their value.

The real estate sector, one of the pillars of Chinese economic growth in recent decades, accounts for 7.5% of the country’s gross domestic product according to the National Statistics Office of China.

Despite his considerable weight on the economy, Chinese Vice Premier Han Zheng in July called for even tighter monitoring of the sector and efforts to “accelerate the development of public rental housing” and avoid the use of public rental housing. ‘real estate to “stimulate short-term growth of the economy”.

Some Evergrande projects have already been put on hold as the company puts assets up for sale to generate cash and tries to negotiate with its suppliers to delay payments and avoid bankruptcy.

Its founder, billionaire Hui Ka-yan, recently warned of the risk that Evergrande might not be able to service its debts and that, as a result, its creditors could take legal action.

The effect of the possible bankruptcy of Evergrande, which employs more than 120,000 people, would be felt not only in the country but on the world markets given the size of the group. EFE

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