Evergrande does not repay its debt
The rating agency demoted the company and its subsidiaries to “limited default”, which means 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 ($ 420 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. at large.
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 as part of a restructuring plan.
Fears of a default caused Evergrande shares to fall 20% on Monday.
So far this year, the stock has lost 87%.
The company had scrambled for months to raise money to pay off lenders, and founding president Xu Jiayin 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.
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Now, however, that streak is over.