Evergrande Bonds Plunge After Report of Suspended Loan Payments

(Bloomberg) — China Evergrande Group’s dollar bonds crashed to fresh lows after a report that the real estate giant plans to suspend interest payments on some loans and Fitch further slashed its credit rating.

The developer’s dollar bond due 2025 fell 1.5 cents on the dollar to 24.2 cents after REDD reported Wednesday that Evergrande plans to suspend interest payments on loans from two banks due Sept. 21 and asked a lender to wait for instructions about an extension plan.

Fitch Ratings earlier cut Evergrande’s credit rating more deeply into junk-bond territory, to CC from CCC+.

“The downgrade reflects our view that a default of some kind appears probable,” Fitch analysts wrote in a note. A day earlier, Moody’s Investors Service cut Evergrande’s credit rating by three notches to Ca, its third downgrade of the property developer since June.

The world’s most indebted developer has become one of the biggest financial worries in China, given its teetering pile of $305 billion in liabilities to banks, shadow lenders, companies, investors, vendors and home buyers. Investor concerns about a possible payment failure at Evergrande have prompted dramatic declines in the company’s bonds in recent weeks and triggered fears of contagion risk in the broader credit market.

Evergrande did not immediately respond to request for comment about Fitch’s downgrade or the report of the planned suspension of loan interest payments.

Evergrande itself warned of default risks last week if its efforts to raise cash fall short. The company separately said Friday that its contracted sales in August, including those to suppliers and contractors to offset payments, dropped 26% compared with a year earlier.

Contact editor Bob Simison (bobsimison@caixin.com)

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