Struggling with a heavy debt load, Shandong Ruyi Technology Group has failed to repay the principal and interest on Rmb1billion bond. Referred to as the ‘LVMH of China’, Shandong Ruyi has built up total debt of more than $4 billion in the course of scooping up controlling stakes in famous brands including athletic apparel maker The Lycra Company and Gieves & Hawkes.

The group is not state-owned but has still felt the squeeze of Beijing’s ebbing support for debt issued by regional and local governments. After it negotiated with bondholders to delay an annual interest payment it had missed in March, the company had hoped for a rescue from Jining City Urban Construction Investment, a Shandong-based local government financing vehicle.

But in June that financing vehicle pulled out of the arrangement and refused to buy a 26 per cent stake in the company. Shandong Ruyi has an interest payment on another Rmb1billion bond, traded on China’s onshore market, due on Tuesday. The group’s international debt is also trading at distressed levels. The price of a $300m bond issued by subsidiary Prime Bloom Holdings due in 2022 has dropped to 20 cents on the US dollar, Bloomberg data show.

Rating agency Moody’s downgraded Shandong Ruyi’s issuer rating in March to Caa3 from Caa1, indicating the group carries “very high credit risk”. It also cut the rating on the bonds issued by Prime Bloom to Ca from Caa2.