Now it’s happened, the Chinese construction giant Evergrande has now declared a default. The rating agency Fitch Ratings has now classified the giant as “restricted default” and ends months of rumors about the construction companies in China.
YTD, the stock, which is listed on the Hong Kong Stock Exchange, has lost 88% of its value. According to statements, the company will now enter into a debt restructuring process that could last over the next few years.
The construction giant has not yet made a statement, but stability seems to be a priority for the Chinese government. It remains to be seen how this will affect bondholders, shareholders, stakeholders, and buyers of real estate. Foreign investors are not expected to be in the first place, but they do not want to get entangled with them, as some of the investors are big names like Blackrock or UPS.
Evergrande is not the only construction company to be downgraded. Kaisa Group Holdings Ltd. was also downgraded to “restricted default” after the company failed to make a $400 million repayment.
YTD, the value of the share has already lost more than 75% of its value.
This means that most of the large Chinese construction companies are gradually becoming unable to pay. How this will affect the global economy remains to be seen.