S&P: Evergrande will default because its business model “is dead”

The debt rating agency Standard & Poor’s (S&P) indicated that it continues to see “very likely“That the indebted Chinese real estate giant Evergrande officially defaults on its obligations, since its main business model”is dead”.

In a report released today, S&P answers some of the most frequently asked questions about Evergrande’s situation, and states that “your biggest test”Will come in March and April 2022, when it will have to face the payment of US $ 3.5 billion in offshore bonds.

In recent weeks, the conglomerate has been several times on the verge of non-payment of its bonds listed abroad, entering into extensions to pay the amounts owed to its investors after not doing so on the agreed date, although for the moment it has not defaulted definitively none of its obligations.

“We believe that the (Chinese) Government wants to correct (the situation of) Evergrande in a controlled manner, or allow an orderly debt restructuring process to take place.”, Points out S&P.

The priority of the authorities, recalls the document, is that the company – and also other developers in financial distress – finish building the homes that it has already sold off plan, which analysts estimate at 1.3 million, for “protect the interests of buyers”.

According to S&P, Beijing also attaches importance to Evergrande paying its suppliers “and other small businesses that support you”.

Although the conglomerate still has “abundant assets“That it can sell to meet the payments of the bonds or other obligations as they come due, S&P does not believe that it will solve its problems like this:”At some point, the huge debt will eventually overtake Evergrande”.

The agency believes that it is “improbable“That the real estate company pay all of its debts because”has lost the ability to sell new homes, which means its main business model is dead”.

According to company data, the group’s total liabilities amounted to more than US $ 300,000 million at the end of June, of which US $ 37,000 million correspond to loans to be repaid before the end of the first half of 2022.

Evergrande remains mired in its efforts to divest fundraising assets, and today announced the sale of all its stakes in “Chinese Netflix” Hengten for about $ 273 million.

However, the plans have not been very successful so far and, in fact, its founder, Xu Jiayin, would be selling personal assets – such as luxury homes or private planes – in order to continue contributing funds to the company, in which would have already injected about US $ 1,100 million since July for “keep her alive”, According to information published in the local press.