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China Evergrande Defaults on Its Debt, Fitch Ratings Says

China Evergrande and its subsidiaries are downgraded to 'restricted default,' Fitch says.
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China Evergrande Group has defaulted on its debt, Fitch Ratings said Thursday, the latest chapter in the saga of the battered Hong Kong property company. 

Fitch said it had downgraded Evergrande and its subsidiaries to "restricted default," indicating the company has failed to pay its financial obligations.

There has been no announcement from the company or the trustee regarding the coupon payments due Nov. 6 for two bonds, after the grace periods lapsed on Monday, Fitch said in a statement.

"We are therefore assuming they were not paid," the statement said. 

Evergrande, which has about $300 billion in total liabilities, warned last week that it might not have enough money to meet its financial obligations

The company is planning to include all its offshore public bonds and private debt obligations in a restructuring.

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The plan would cover public bonds sold by Evergrande and its Scenery Journey business unit. It would include about $260 million of notes issued by joint venture Jumbo Fortune Enterprises that Evergrande has guaranteed.

S&P Global Ratings said earlier this week that a default appeared "inevitable" and Evergrande's position remained precarious after it received a demand from creditors to pay about $260 million.

"Should Evergrande default, there may be contagion effects for other developers, home prices, and the economy," S&P credit analyst Christopher Lee wrote in October.

The Chinese government has said that at Evergrande's request, it would send a working group to oversee risk management, strengthen internal controls and maintain normal operations.

Evergrande said it intended to actively engage with creditors to come up with a "viable restructuring plan" to deal with its offshore debts. 

The restructuring could have big implications around the world. Investors are watching whether China can coordinate a restructuring without disrupting the global real estate sector, which accounts for nearly a quarter of economic output globally, according to Bloomberg.