(Bloomberg) -- China Aoyuan Group Ltd. was downgraded to restricted default by Fitch Ratings two days after the Chinese developer flagged its intention to renege on debt obligations.
Aoyuan hasn’t provided further information to the rating agency beyond its announcement that it won’t make payments on four dollar bonds, which would trigger defaults on all other offshore debt, Fitch said in a statement Friday. Earlier in the day, Moody’s also withdrew its ratings on the builder citing insufficient information.
Guangzhou-based Aoyuan becomes the latest Chinese developer to succumb to the industry’s liquidity crunch. The deepening crisis has fueled a property market slump and prompted the government to dial back some of the curbing measures. Regulators including the housing ministry and the banking watchdog are considering lifting some restrictions on developers’ access to cash from presold properties tied up in escrow accounts, people with knowledge of the matter said this week.
Read a Bloomberg spotlight on China Aoyuan
Aoyuan, ranked 37th by sales among Chinese developers last year, made the decision not to pay the debts “to preserve its limited cash resources and maintain fairness among all of its creditors pending a holistic debt restructuring,” it said late Wednesday. It has $5 billion of onshore and offshore bonds outstanding, according to Bloomberg-compiled data.
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