Photo/Illutration People gather to demand repayment of loans and financial products at the lobby of Evergrande’s Shenzhen headquarter in China’s Guangdong province on Sept. 13. (Reuters)

SHANGHAI--China Evergrande Group’s main unit, Hengda Real Estate Group Co. Ltd., applied on Thursday to suspend trading of its onshore corporate bonds following a downgrade, as the country’s No.2 property developer wrestles with a liquidity crisis.

The application follows repeated trading freezes of the bonds in recent days by the Shanghai and Shenzhen stock exchanges due to volatile trade.

Hengda received notice on Sept. 15 from rating agency China Chengxin International (CCXI) that the bonds’ ratings had been downgraded to A from AA, and that both the bonds ratings and its issuer rating were put on a watch list for further downgrades, it said in a stock exchange filing.

Hengda applied to suspend trade of its onshore corporate bonds for one day, it said. On the resumption of trade on Sept. 17, its Shanghai and Shenzhen exchange-traded bonds will only be traded through negotiated transactions.

A bond trader, who declined to be identified, said that the changes in the trading mechanism were likely aimed at limiting participation and curbing volatility.

"Many companies would adjust the trading mechanism of their bonds ahead of default," he said.

The company’s January 2023 Shenzhen-traded bond was last quoted at 24.99 yuan on Wednesday, and its Shanghai-traded May 2023 bond traded at 30 yuan.

China Evergrande’s 8.75 percent June 2025 dollar bond was trading at 29.375 cents on Thursday morning, up about 4 cents from lows on Wednesday, according to financial data provider Duration Finance.

The indebted property developer is scrambling to raise funds to pay its many lenders and suppliers, as it teeters between a messy meltdown with far-reaching impacts, a managed collapse or the less likely prospect of a bailout by Beijing.

Worries over possible contagion from Evergrande’s debt crisis have spilled over to other Chinese high-yield issuers. An index of Chinese high-yield dollar debt fell to 374.646 on Thursday morning, its lowest level since April 14, 2020.