Chinese builder Sichuan Languang Development failed to repay a local bond, marking its first default in a domestic credit market grappling with rising debt failures. The company was not able to raise enough funds for the repayment on a 900 million yuan (US$139 million) local bond that matured on Sunday, which amounts to a default, according to a statement on Monday from Languang to the Shanghai Clearing House. The builder said last week it might not be able to make the payment. Languang is the latest Chinese developer to miss a payment this year, with the sector driving a record surge of domestic corporate bond defaults as Beijing has moved to curtail borrowing in the debt-laden industry. The delinquency “will also trigger cross-defaults” on local bonds and the firm’s offshore debt, said S&P Global Ratings. Languang has US$1.05 billion of dollar bonds outstanding, according to data compiled by Bloomberg. “The Languang default shows the deleveraging campaign will continue to fuel credit risk polarisation in Chinese bonds,” according to Natixis economist Gary Ng. He said spreads could eventually widen for offshore notes “as investors become more selective in seeking safer investments or demanding high yields to compensate the extra risks.” Chinese junk-rated dollar bonds, of which developers make up a large portion, recently saw their worst sell-off since the pandemic roiled markets in March 2020. Fuelling that has been concern about heavyweight China Evergrande Group , whose leverage is watched by the highest levels of China’s government for potential systemic risks to the economy . Languang is one of China’s bigger builders, ranked 38th by contracted sales in 2020, according to China Real Estate Information. The developer said on Monday night it and its units had 4.5 billion yuan of overdue debt. China Fortune Land Development, which saw its first bond default earlier this year, in comparison recently disclosed its delinquency total had reached 67 billion yuan. S&P, which downgraded Languang to D from CCC- on Tuesday, said the builder not paying the 900 million yuan bond is likely to result in a general default triggering cross defaults and accelerated payment demands on other debt, including dollar notes. The ratings firm also does not expect Languang to repay 3.3 billion yuan of domestic bonds coming due in the next three months. A Languang media representative did not immediately reply to a request for comment on Tuesday on a potential dollar bond default. One Languang unit disclosed on Monday it hired a financial adviser to explore potential options for what it called a “consensual resolution” with holders of its three dollar bonds, which mature in 2022 and 2023. They’re all currently priced below 30 cents on the dollar, Bloomberg-compiled data show. “The company’s refinancing in the public market has run into trouble since the end of 2020,” Languang said on Monday. That, plus strained operating cash flow and debt accelerations imposed by some financial institutions, led to the missed bond payment, it added. The firm is making a “medium- to long-term, comprehensive” plan to resolve its problems with “strong support” from local authorities and “active coordination” of financial regulatory institutions. Languang’s shares listed in Shanghai have tumbled 41 per cent this year, one of the biggest decliners in the Shanghai Composite Index.