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Evergrande 75% Haircut Is Now a Base Case for Bond Analysts

  • Analysts see indebted developer entering restructuring process
  • Lack of precendents may be a challenge for Chinese authorities
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WATCH: Bond analysts are now saying that a haircut of 75% for Evergrande is now a base case.(Source: Bloomberg)
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China Evergrande Group may undergo one of the country’s biggest-ever debt restructurings, if the developer’s distressed-level bond prices are any indication.

It’s “almost unavoidable,” said Nomura International Hong Kong Ltd. credit analyst Iris Chen. Her base case is a government-supervised deal that ensures Evergrande delivers homes and pays suppliers, where dollar debt investors would get 25% of their money back. Luther Chai, a senior research analyst at CreditSights Singapore LLC, also predicts Evergrande may default and enter restructuring. That risk is being priced in, with many of Evergrande’s dollar bonds trading near 30 cents.