UPDATE 1-Fitch downgrades China Evergrande's ratings, sees 'probable' default

(Adds detail on downgrades, share and bond prices, context)

Sept 8 (Reuters) – Fitch Ratings cut the ratings of China Evergrande Group and two of its subsidiaries on Wednesday, the latest in a series of downgrades targeting the indebted property firm.

In a statement, Fitch said it had downgraded the long-term foreign-currency issuer default ratings of Evergrande and subsidiaries Hengda Real Estate Group Co and Tianji Holding Ltd to CC from CCC+. Fitch defines a CC rating as indicating “very high levels” of credit risk.

Fitch also downgraded the senior unsecured ratings of Evergrande and Tianji, as well as the rating on Tianji-guaranteed senior unsecured notes issued by Scenery Journey Limited to C from CCC.

“The downgrade reflects our 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 said in the statement.

The move comes after Moody’s Investors Service and domestic ratings agency China Chengxin International also downgraded Evergrande’s ratings in recent days.

Evergrande’s shares fell as much as 3.08% in early trade on Wednesday before trimming losses. Electric vehicle venture China Evergrande New Energy Vehicle Group Ltd fell 10%.

The price of Evergrande’s Shenzhen-traded May 2023 bond slipped 0.57% on Wednesday morning to 34.8 yuan.

The bond’s price has fallen nearly 50% since a downgrade of Evergrande’s rating by China Chengxin International last week made the company’s onshore bonds ineligible for use as collateral in repo financing transactions.

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