Ratings agency Fitch confirmed that Evergrande defaults on over a billion dollars of bond repayments as it downgraded the firm's status to a restricted default rating.
Property developers China Evergrande Group has defaulted for the first time, as authorities scrambled to avoid contagion throughout the world's second biggest economy.
Fitch Ratings agency confirmed on Thursday that Evergrande had defaulted on more than $1.2 billion worth of bond debt, as it downgraded the firm's status to a restricted default rating.
Fitch also declared Kaisa, a smaller property company but one of China's most indebted, had defaulted on $400 million of bonds.
Neither Evergrande, nor Kaisa, have yet to make any comments on the default reports. However, Evergrande said last week it planned to forge ahead with a restructuring of its debt.
More than 10 Chinese real estate firms have now defaulted in the second half of this year.
Market to handle
Yi Gang, governor of the People's Bank of China, said on Thursday Beijing planned to handle Evergrande's future in a market-oriented way.
"The rights and interests of creditors and shareholders will be fully respected in accordance to their legal seniority," Chinese state media quoted Yi as saying in a pre-recorded video message to a top-level seminar in Hong Kong.
But even with those assurances, investors remain in the dark about what the future holds and what Beijing's overall plan is.
"In the next step, I think all the creditors will sue Evergrande," Chen Long, a partner at research firm Plenum told AFP, adding Fitch's announcement formalised what investors already knew about the defaults.
Evergrande will have "to enter a period of restructuring," he said, adding that while creditors will hope to secure assets on the mainland "I don't think it will be very successful".
Property industry crisis
The Chinese government sparked a crisis within the property industry when it launched a drive last year to curb excessive debt among real estate firms as well as rampant consumer speculation.
Companies that had accrued huge debt to expand suddenly found the taps turned off and began struggling to complete projects, pay contractors and meet both domestic and foreign repayments.
Real estate behemoth Evergrande had been the highest-profile firm to become embroiled in the crisis, struggling for months to raise capital to pay off $300 billion in debt.
Source: TRTWorld and agencies
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