Advertisement
Banking & finance
BusinessBanking & Finance

Evergrande crisis: a third of China’s developers may face pressure with US$84 billion in debt maturing by end of 2022, S&P warns

  • More than half of rated Chinese property developers have junk-rated debt, S&P says
  • Risk of default is ‘real’ as massive pile of offshore, onshore debt set to mature by December 2022

Reading Time:4 minutes
Why you can trust SCMP
3
Concerns are rising about the high level of debt carried by China’s developers. Photo: AFP
Chad BrayandPearl Liu
A third of China’s property developers could see their liquidity “acutely strained” in the worst case scenario as weaker sentiment and new government regulations weigh on their funding sources, with a “real” risk of default as some US$84 billion in debt is set to mature by the end of next year, according to S&P Global Ratings.

The credit rating company said that more than half of its rated portfolio of Chinese property developers are “most at risk” under such a scenario as their bonds are rated as junk, from “B-” to “B+”, or two levels below investment grade.

“The entities have also made heavy use of funding via joint ventures and trust loans, given they have been largely shut out of more conventional funding,” S&P analysts Matthew Chow and Aeon Liang said in a research note. “New regulations and weak sentiment are squeezing these capital channels.

Advertisement

“The idea that entities may be abruptly deprived of such funding, threatening refinancing plans and potentially triggering defaults, is a large part of our scenario analysis.”

Concerns are rising about the high level of debt carried by China’s developers as a massive liquidity crisis at China Evergrande Group, the mainland’s biggest home builder by sales, has spooked financial markets.

01:46

World’s most indebted developer, China Evergrande Group, buys time to repay more creditors

World’s most indebted developer, China Evergrande Group, buys time to repay more creditors
Evergrande, the world’s most indebted developer, missed a series of interest payments on its offshore debt in September and October as it strains under more than US$300 billion in total liabilities and faces a difficult combination of government regulations restricting borrowing by overburdened developers and weakening property sales.
Advertisement
Select Voice
Choose your listening speed
Get through articles 2x faster
1.25x
250 WPM
Slow
Average
Fast
1.25x