In a sensational development, China’s billion dollar property developer Evergrande has defaulted on a bond due on Tuesday.
The USD725m 8.25% 2017 bond was issued last May.
China says the company has applied to have its debt placed under judicial management.
It is the first Chinese company to default on a bond since 2008.
It is not known if it has already signed up to Chinese bankruptcy legislation which came into force last August.
“There are a lot of unknowns about Evergrande. We know it has a net debt of around 500bn yuan (£60bn), but I really don’t know what level is normal,” Tony Chu, an analyst at Moody’s China in Hong Kong, told BBC World Service.
He said Evergrande is widely viewed as one of the few Chinese property developers seen as not being burdened by overexpansion.
“I don’t know whether it is a matter of history or just poor business management. It is quite clear that in China you have this kind of thing with some developers. Every time the government steps in, they find reasons to come back.”
Last year, the company defaulted on a bond due for payment in June due to a default clause in the loan agreement.
This year, the Chinese economy recorded its slowest growth in nearly three decades. This is hitting developers across the country hard and has prompted Beijing to crack down on shadow banking.
The default is expected to raise the profile of China’s troubled debt situation.
“The property sector is one of the sectors that we think will be very key in the eyes of policymakers as far as restructuring and deleveraging are concerned,” said Mr Chu.
“We actually expect that the political aspect will play an important role. Remember that Evergrande is a subsidiary of the government. That it has some level of political control.”