HONG KONG—For years, China Evergrande Group rode some of the biggest trends in Chinese finance, using debt-fueled growth to capitalize on a seemingly unstoppable property boom in China.
Global investors, many of whom believed the developer was too big to fail, bought up its high-yielding U.S. dollar bonds to earn fat returns.
Now, Chinese entrepreneur Hui Ka Yan’s real-estate-focused conglomerate is struggling to adapt to a new era—and its depressed stock and bond prices point to shaken investor confidence.
Four-year bonds that Evergrande sold in January 2020 with a 12% coupon were recently bid at about 53 cents on the dollar, according to Tradeweb, reflecting investors’ pessimism about being made whole when the debt comes due. On Monday, S&P Global Ratings downgraded Evergrande two notches to B-, citing a “severe decline in profitability” as the company cut prices of its apartments to boost sales.
Evergrande’s stock tumbled 13% on Tuesday after the company scrapped plans for a special dividend, and has declined 61% in the year to date, according to FactSet.
