China Evergrande Defaults on Its Debt, Fitch Says

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HONG KONG — China Evergrande has defaulted on the debt it owes to global investors, one credit rating firm said on Thursday, as questions swirled about how Beijing would fix a debt-laden property company that has come to symbolize the problems plaguing the world’s second-largest economy.

The firm, Fitch Ratings, said in a statement that it had placed the Chinese property developer in its “restricted default” category. The category means that China Evergrande had formally defaulted but had not yet entered into any kind of bankruptcy filing, liquidation or other process that would stop its operations.

The announcement came after the expiration on Monday of a deadline for Evergrande to make payments on two of its bonds, worth more than a combined $82 million. Evergrande said nothing after the deadline expired, but some bondholders said they had not received their payments.

Evergrande did not respond to a request for comment. Fitch said the company had not responded to its own request for confirmation about the bond payments it missed.

The next steps were not immediately clear. Evergrande has already said it would “actively engage” with its foreign creditors to come up with a plan for restructuring — an often long and drawn-out process that can involve stripping a company down and selling off its parts to pay everyone off.

But any move would require the blessing of the Chinese government, which worries that a sudden unwinding of the company could hit the country’s financial system or potentially the many homeowners in China who have already paid for apartments that are yet to be built.

Earlier this week, Evergrande said officials from several state-backed institutions had joined a risk committee that would help the company restructure itself.

While Fitch’s designation has made Evergrande’s default official, the market had long anticipated this moment. For months, Evergrande has struggled to meet deadlines on bond payments. For many, it was only a matter of time before the company ran out of cash to pay its bills.

“We all expected that Evergrande was not going to be able to pull a rabbit out of their hat,” said Michel Löwy, chief executive of SC Lowy, an investment firm that has a small position in Evergrande bonds.

“Now, the ball is in their court to come up with some form of restructuring proposal,” he said.


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