Bond Market News

Fitch downgraded both Evergrande and Kaisa to RD from C following the developers’ missed coupon payments. It downgraded Evergrande’s subsidiaries Hengda and Tianji to RD too. Fitch notes that Evergrande’s downgrade reflected the non-payment of coupons on November 6, 2021 for Tianji’s 13% 2022s and 13.75% 2023s after the grace period lapsed on December 6, 2021. There has been no announcement by Evergrande regarding the coupons and the non-payment has triggered cross-defaults on Evergrande’s bonds. Additionally, there has been uncertainty regarding its restructuring plan adding to the risks. Fitch affirmed the senior unsecured ratings of Evergrande and its subsidiaries’ bonds at C, with a recovery rating of RR6. IFR notes that historically, RR6 securities only recover 0%–10% of their principal and related interest following a default, based on Fitch’s rating definition. Bloomberg notes that the technical default of Evergrande will also be the largest ever by an Asian issuer.

Evergrande’s dollar bonds were trading stable at just over 21 cents on the dollar.

Kaisa’s downgrade followed after it failed to repay its $400mn bonds due December 7, 2021 with no grace period for the bond repayment. Fitch adds that the non-payment of the bond has triggered cross-defaults on its other dollar bonds which “will become immediately due and payable if the bond trustee or holders of at least 25% in aggregate principal amount of the offshore notes declare so”. Similar to Evergrande, Kaisa’s restructuring plans are also uncertain. Fitch affirmed Kaisa’s senior unsecured ratings and that on its outstanding dollar bonds at C, with the an RR4 rating.

Kaisa’s dollar bonds were trading steady at just over 34 cents on the dollar.

For the rating action on Evergrande, click here. For the rating action on Kaisa, click here