On Thursday, the credit rating agency downgraded the company and its subsidiaries to “restricted default,” meaning the company has not met its financial obligations.
Fitch said the downgrade reflects the company’s inability to pay interest due earlier this week on two dollar-denominated bonds. Payments were due a month ago and grace periods expired on Monday.
Fitch said Evergrande did not make any announcements about the payments or respond to inquiries from the rating agency. “So we assume they were not paid,” Fitch said.
Evergrande did not immediately respond to a request for comment from CNN Business. However, the company warned that this could happen. In a stock exchange presentation last Friday, he said he may not have sufficient funds to meet his financial obligations. At the time, he said he planned to “actively engage” with offshore creditors in a restructuring plan.
In another presentation on Monday, the company said it would establish a risk management committee to be headed by Evergrande president and founder Xu Jiayin to focus on “mitigating and eliminating” future risks.
Default fears sent Evergrande’s stock plummeting 20% on Monday. So far this year, the stock has lost 87%.
The company had been struggling for months to raise cash to repay lenders, and Xu has even been selling personal assets to shore up his finances. It previously appeared to avoid defaulting on any of its offshore bonds by paying past due interest before its grace periods expired. Now, however, that streak is over.
The Chinese authorities have been trying to contain the consequences of the Evergrande debt crisis. Last Friday, the local government of Guangdong province, where Evergrande is based, said 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 rights of Evergrande’s shareholders and creditors will be fully respected in accordance with their legal seniority,” People’s Bank of China Governor Yi Gang said in a video address to a Hong Kong forum on Thursday, according to the central bank. .
But other Chinese developers are in trouble too. On Thursday, Fitch downgraded Kaisa Group to “restricted default”.
– This is a story in development and will be updated.