Embattled China Evergrande Group’s (恒大集團) credit rating was yesterday downgraded for the second time in two days, raising fears that the world’s most indebted company would default and sending its shares tumbling below their listing price 12 years ago.
The Hong Kong-listed property giant has run up a mountain of liabilities totaling more than US$300 billion after years of borrowing to fund rapid growth and a string of real-estate acquisitions, as well as other assets, including a Chinese soccer team.
However, the firm has in the past few years struggled to service its debts, and a crackdown on the property sector by Beijing has made it even harder to raise cash, fueling concerns it could go bankrupt.
Still, those worries were increased yesterday when Fitch Ratings Inc cut its rating for the firm to “CC,” reflecting its view that “a default of some kind appears probable.”
“We believe credit risk is high given tight liquidity, declining contracted sales, pressure to address delayed payments to suppliers and contractors, and limited progress on asset disposals,” Fitch Ratings wrote in a statement.
The move came a day after Moody’s Investors Service slashed its rating, indicating that it is “likely in, or very near, default,” while Goldman Sachs Group Inc has cut the stock from “neutral” to “sell.”
The news sent the firm’s shares plunging more than 3 percent to as low as HK$3.46, lower than their HK$3.50 initial public offering price, before recovering slightly by the break.
The firm’s stock has collapsed about 75 percent this year alone.
Last week, the group said its total liabilities had swelled to 1.97 trillion yuan (US$304.85 billion) and warned of risks of defaults on borrowings.
Evergrande has undergone an asset sale, including offloading stakes in holdings such as a Hong Kong-listed Internet business, a regional bank and an onshore property firm.
Reports have said it is considering whether to sell its Hong Kong headquarters and a large land parcel in the territory at a loss.
However, authorities have not yet made clear what their plans for the firm are.
The group says it employs 200,000 people and indirectly generates 3.8 million jobs in China.
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