The Wall Street Journal, in a report from earlier this year, called the company China Evergrande Group “the most indebted developer on record,” owing as much as $300 billion. The latest step in a months-long financial squabble that foreshadows a huge restructure of the world’s most indebted builder has been taken.

According to a statement, Fitch Ratings cut the developer to restricted default after it failed to make two coupon payments after a grace period expired on Monday. The credit analyst stated that the developer did not respond to an inquiry about the payment and is assuming it was not made. A downgrade may result in cross defaults on Evergrande’s $19 billion of dollar debt.

A restricted default is one step short of a default and creates a situation where the issuer of a security has specified in the indenture or other documentation related to the security that certain creditors or other holders of the security must receive priority over others in the event of bankruptcy or liquidation. The purpose of a restricted default is to ensure that these “priority creditors” are able to recover at least a portion of their investment, even if the issuer of the security goes bankrupt.

Additionally, Fitch lowered the ratings on Kaisa Group Holdings Ltd. to restricted default due to its failure to pay a $400 million bond that matured Tuesday, according to reports. The ratings cut could also lead to cross defaults on the developer’s $11.2 billion of outstanding dollar debt. After emerging from a high-profile default in 2015

At the same time, china’s government has increasingly become involved in the firm’s administration. The country’s largest bad-debt manager, China Cinda Asset Management Co., was added to the developer’s existing seven-member risk committee. Another member is from a legal firm, while only two members are from Evergrande, including Hui.

It is not difficult to understand why many American investors expect the Chinese government will repay them first. However offshore creditors, including Marathon Asset Management, have said they anticipate that offshore creditors would be at the bottom of the list for reimbursement. The Chinese government’s major aim is most often social stability, which implies giving priority to homeowners, workers, and individual investors

Some offshore creditors are already consulting with financial and legal advisers. It could help that bondholders may include some of the world’s biggest investment firms, which China is unlikely to want to alienate. Ashmore Group, BlackRock Inc., FIL Ltd., UBS Group AG and Allianz SE have all reported holding Evergrande debt in recent months, Bloomberg-compiled data show.

Keepwell provisions are also included in overseas bonds from Evergrande. These are essentially a gentleman’s agreement where the promise is made to keep an offshore issuer solvent, and they may not be legally enforceable in this bankruptcy.

The situation is evolving rapidly and it remains to be seen what impact this will have on the global financial markets and investments into traditional asset holdings.