Evergrande defaulted on its debt, according to Fitch Ratings

The rating agency on Thursday downgraded the company and its subsidiaries in “limited default”, which means that the company has not met its financial obligations.

Fitch said the downgrade reflects the company’s inability to pay interest owed earlier this week on two dollar-denominated bonds. Payments were due a month ago and the grace periods expired on Monday.

Fitch noted that Evergrande had not made any announcements regarding the payments, or responded to inquiries from the rating agency. “So we’re assuming they weren’t paid,” Fitch said.

Evergrande has total liabilities of around $ 300 billion, and analysts have been wondering for months whether a default could trigger a wider crisis in the Chinese real estate market, hurting homeowners and the financial system as a whole. The US Federal Reserve warned last month that China’s real estate problems could hurt the global economy.

Evergrande did not immediately respond to a request for comment from CNN Business. However, the company had warned that this could happen. Last Friday, in a stock exchange filing, he said he might not have enough funds to meet his financial obligations. At the time, he said he planned to “actively engage” with foreign creditors on a restructuring plan.

In another filing on Monday, the company said it would set up a risk management committee that would be chaired by the president and founder of Evergrande, Xu Jiayin, to focus on “mitigation and elimination.” future risks.

Default fears caused Evergrande shares to fall 20% on Monday. So far this year, the title has lost 87%.

The company had struggled for months to raise funds to repay the lenders, and Xu even sold personal assets to support his finances. It previously seemed to avoid default on one of its offshore bonds by paying late interest before their grace periods expired. Now, however, that streak is over.

Another credit rating agency, S&P, said earlier this week that “default seems inevitable for Evergrande” with repayments of $ 3.5 billion of US dollar-denominated bonds due in the coming months.

“The transmitter [Evergrande] does not appear to be making much progress in resuming construction, given its difficulty in raising new financing, “S&P Global analysts wrote in a note released Monday.

Chinese authorities tried to contain the fallout. Last Friday, the local government of Guangdong province, where Evergrande is located, announced that it would send a task force to Evergrande to oversee risk management, strengthen internal controls and maintain normal operations, at the request of the company.

The People’s Bank of China and other prominent financial regulators have tried to reassure the public that Evergrande’s problems can be contained. The central bank also announced on Monday that it would inject $ 188 billion into the economy, apparently to counter the housing crisis.

“The rights of Evergrande shareholders and creditors will be fully respected in accordance with their legal seniority,” PBOC Governor Yi Gang said in a video speech to a Hong Kong forum on Thursday, according to the central bank.

But other Chinese developers are also struggling. Thursday, Fitch lowered the rating Kaisa Group on “Default Restricted”.

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