Fitch downgrades Kaisa, Evergrande and its subsidiaries to restricted default amid missed payments

The concerns around China’s distressed property developers are far from over, as Fitch Ratings on Thursday downgraded Kaisa Group, Evergrande Group and its subsidiaries, Hengda and Tianji, to restricted default following the missed payments.

For Evergrande, Fitch noted, "This reflects the non-payment of coupons due 6 November 2021 for Tianji's USD645 million 13% bonds and USD590 million 13.75% bonds after the grace period lapsed on 6 December. The non-payment is consistent with an 'RD' rating, signifying the uncured expiry of any applicable grace period, cure period or default forbearance period following a payment default on a material financial obligation."

"Failure to make the principal payment is consistent with Fitch's definition of an 'RD' rating, as the company has experienced an uncured payment default on a material financial obligation but has not yet entered into a bankruptcy filing, administration, receivership, liquidation, or other formal winding-up procedures, and has not otherwise ceased operating,” Fitch Ratings said on Kaisa’s downgrade.

This comes after the Chinese central bank Governor Yi Gang said, “the risks from a few property firms in the short-term will not undermine Hong Kong’s capital market.”

Market reaction

These above headlines failed to have any material impact on the market mood, as investors digest the mixed Omicron news ahead of the critical US inflation data due on Friday.

The S&P 500 futures are down 0.20% on the day while AUD/USD is heading back towards 0.7150, as of writing.