Beijing — Two major Chinese property firms have defaulted on $1.6 billion worth of bonds to overseas creditors, Fitch Ratings agency said Thursday, as contagion spreads within the country’s debt-ridden real estate sector. China’s government sparked a crisis within the property industry when it launched a drive last year to curb excessive debt among real estate firms as well as rampant consumer speculation.
Real estate behemoth Evergrande has been the highest profile firm embroiled in the crisis, struggling for months to raise capital to pay off $300 billion in debt.
On Thursday, Fitch confirmed the company had defaulted for the first time on more than $1.2 billion worth of bond debt, as it downgraded the firm’s status to a restricted default rating. Fitch also confirmed Kaisa, a smaller property company but one of China’s most indebted, had also defaulted on $400 million of bonds.
Last month it missed its first foreign bond repayment but there was a 30-day grace period attached. That ran out on Tuesday with some bond owners complaining they had yet to be repaid.
Questions have swirled over whether Evergrande is simply too big to be allowed to fail, given its collapse could send shock waves through the wider Chinese — and even the global economy.
In other words, this could spell disaster for the entire global economy further complicating a post COVID crisis that conjures up a perfect storm coming.
