Evergrande has been demoted to restricted default status.

China Evergrande Group was downgraded by Fitch Ratings after the company missed paying interest on two batches of bonds a few days ago. Source: Nikkei Asia

Fitch Ratings today downgraded China Evergrande Group and its subsidiaries Hengda Real Estate Group and Tianji Holding from C to RD (limited default). According to Fitch, this action is due to the company’s failure to pay interest on two lots of Tianji bonds maturing on November 6 and due on December 6.

This is the company’s first default on a dollar bond. According to Bloomberg, the event marks the end of the giant real estate market created 25 years ago by billionaire Hui Ka Yang. It is also the biggest challenge facing the Chinese government in its efforts to prevent the spread of the real estate debt crisis to other regions.

As of June, the real estate giant had more than $ 300 billion in debt. They intend to “actively discuss” the restructuring with international lenders. Bondholders who own $ 19.2 billion in USD-quoted Evergrande bonds could face significant losses due to the government’s reluctance to intervene.

However, Chinese officials are intervening. The Guangdong provincial government, where Evergrande is located, called in Hui Ka Yang after the company announced its intention to negotiate with creditors on a restructuring plan. The authorities will dispatch an action team to Evergrande to encourage them to minimize risks, tighten internal controls, and maintain regular operations. Evergrande said earlier this week that the administration now has the majority of seats on the new risk management board.