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Not only Evergrande, because the Chinese Sinic also creaks

Not only Evergrande, because the Chinese Sinic also creaks

Rating agency S&P downgrades Chinese real estate group Sinic Holdings: Evergrande's financial difficulties are putting pressure on the entire sector, and beyond

Rating agency S&P Global Ratings downgraded Chinese real estate development group Sinic Holdings to CCC +, motivating the decision with the company's inability to "communicate a clear repayment plan".


Sinic's shares on the Hong Kong Stock Exchange fell 87 percent on Monday, causing the company to lose $ 1.5 billion in market value before transactions were put on hold. The collapse is linked to the financial problems of the Chinese group Evergrande, which are putting pressure on the entire real estate sector in the country.


In the note accompanying its negative judgment, S&P writes that Sinic had prepared to repay its senior notes of $ 246 million by October 18 "with its unrestricted cash balance of over RMB 14 billion. Chinese (US $ 2.17 billion) as of June 30, 2021. However, so far there has been no progress and the timing of any remittance is uncertain ”.

Last week S&P further downgraded Evergrande from "CC" to "CCC", giving a negative view on the company's prospects.


In a letter to company staff, Evergrande president Hui Ka Yuan said he was certain the company "will come out of its darkest moment", finish its planned real estate projects and honor its commitments to buyers, investors, partners and financial institutions.

The group has a debt of 305 billion dollars which is causing fear of repercussions on the Chinese financial system and, consequently, on the global economy. There are three options for Evergrande, Reuters explains: a disorderly collapse, a managed default or – but unlikely – a bailout by the Beijing authorities.

This Thursday Evergrande will have to repay $ 83.5 million in interest on its bonds for March 2022; Another payment of $ 47.5 million for the March 2024 bonds is scheduled for 29 September.

Meanwhile, its shares continue to lose value. They fell 10.2 percent on Monday, to Hong Kong dollars 2.28 each.


The Evergrande case, due to its size, is being compared to that of Lehman Brothers, the large US investment bank that went bankrupt in 2008 due to its inability to support its debts, whose bankruptcy contributed to the global economic crisis known as "Grande recession".

According to analysts, these comparisons make little sense. Ryan Detrick of LPL Financials told Reuters that "First, dollar bonds are likely to be restructured, but most of the debt is in global mutual funds, ETFs and some Chinese companies, and not in banks or other major institutions. financial ”, as opposed to Lehman Brothers. Detrick, then, thinks that the Chinese government will intervene in case of default.

According to most observers, however, the Chinese government is unlikely to decide to proceed with a direct rescue of Evergrande. National political authorities have asked Evergrande's lenders to extend interest payments.

This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/mondo/evergrande-sinic-cina/ on Tue, 21 Sep 2021 09:04:02 +0000.