Evergrande is likely to default without direct assistance, says S&P


(Bloomberg) – The China Evergrande group is unlikely to receive direct government backing and is poised to default on upcoming debt payments, S&P Global Ratings said.

The ailing promoter’s problems could further undermine investor confidence in China’s real estate sector and more generally in bad-rated credit markets, according to an S&P report dated September 20.

“We believe that Beijing would only be forced to intervene if there was a large-scale contagion causing the failure of several major developers and posing systemic risks to the economy,” he said. “Evergrande would fail on its own probably wouldn’t lead to such a scenario.”

Contagion concerns have fueled a global liquidation as investors assess the policy tightening that has hit the real estate sector over the past year through the ‘three red lines’ effort to curb debt growth . Debate has intensified over whether the Chinese government could help Evergrande or other manufacturers, after it took months for plans to emerge for China Huarong Asset Management Co., one of the the main managers of troubled assets in the country.

The Evergrande saga reaches its climax. Chinese authorities have previously told major lenders not to expect interest payments on bank loans due this week. Interest also matures Thursday on two of the developer’s bonds.

© 2021 Bloomberg LP

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