A ratings agency’s declaration confirmed what investors had already suspected, but they now must wait on a restructuring plan overseen by the firm hand of Beijing.
For weeks, global markets have been watching the struggles of China Evergrande, a teetering real estate giant weighed down by $300 billion or more in obligations that just barely seemed able to make its required payments to global investors, the New York Times reports.
On Thursday, three days after a deadline passed leaving bondholders with nothing but silence from the company, a major credit ratings firm declared that Evergrande was in default. Instead of resolving questions about the fate of the Chinese behemoth, the announcement only deepened them.
The firm, Fitch Ratings, said in its statement that it had placed the Chinese property developer in its “restricted default” category. The designation means Evergrande had formally defaulted but had not yet entered into any kind of bankruptcy filing, liquidation or other process that would stop its operations.
It’s the nature of that next step — bankruptcy, a fire sale or business as usual — that remains unknown. In the United States and many other places, bondholders could push an unwilling company into some form of reorganization, usually in court, and divvy up the pieces.
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