Evergrande Update: 33% of China’s property developers face a real risk of default – S&P

Analysts at S&P Global Ratings warned in a research note on Friday, amidst the ongoing China Evergrande crisis, a third of the country’s property developers could face a “real” risk of default, with about US$84 billion in debt maturing by the end of next year, per South China Morning Post (SCMP).

Key takeaways

“More than half of its rated portfolio of Chinese property developers are “most at risk” under such a scenario as their bonds are rated as junk, from “B-” to “B+”, or two levels below investment grade.”

“The entities have also made heavy use of funding via joint ventures and trust loans, given they have been largely shut out of more conventional funding,”

“New regulations and weak sentiment are squeezing these capital channels.”

“The idea that entities may be abruptly deprived of such funding, threatening refinancing plans and potentially triggering defaults, is a large part of our scenario analysis.”

Meanwhile, it was reported earlier on that Evergrande, the world’s most indebted developer, made another debt payment of USD47.5 million ahead of a Friday deadline, averting default for the second time in two weeks.

Evergrande’s liquidity crunch amounts to more than $300 billion in liabilities, leaving investors on the edge.

Market reaction

Amid negative earnings from Wall Street giants, Amazon and Apple Inc, the S&P 500 futures are shedding 0.43% so far. The Asian stocks are also mostly lower after ECB’s disappointment and worse-than-expected US Q3 GDP data.