(Recasts, adds context, detail, downgrades) SHANGHAI, Sept 7 (Reuters) - Bonds and shares of China Evergrande Group deepened their rout on Tuesday, with one exchange-traded note tumbling more than 20%, as the company faced fresh downgrades over its ability to restructure its massive debts. Debts at Evergrande, the country’s No. 2 developer, have triggered warnings from regulators worried that its 1.97 trillion yuan ($305.02 billion) of liabilities could spark broader financial risks if not stabilised. Moody’s Investors Service said on Tuesday it had downgraded the corporate family rating (CFR) of China Evergrande Group and its subsidiaries, following a damaging ratings downgrade by domestic agency China Chengxin International last week. “The (Moody’s) downgrades reflect Evergrande’s heightened liquidity and default risks given its sizable amount of maturing debt over the next 6-12 months,” Cedric Lai, Moody’s vice president and senior analyst said in a statement. “The downgrades also reflect the weak recovery prospects of Evergrande’s creditors, if there is a default,” added Lai. Evergrande’s shares fell nearly 9% at one point on Tuesday to touch their lowest level since July 2015, and the company’s Shenzhen-traded 5.9% May 2023 bond, fell as much as 20.45%, extending a drop of more than 35% a day earlier. China Chengxin International’s downgrade last week made Evergrande’s onshore bonds ineligible for use as collateral in repo transactions, prompting a sell-off that triggered trading halts on Friday and Monday. Worries surrounding Evergrande, which has been scrambling to raise funds to pay lenders and suppliers, have grown into broader concerns that a debt crisis could send shockwaves through China’s banking system. MARKET FALLOUT Traders said thin market liquidity of onshore bonds meant that a single trade can have an outsized impact on the bonds’ prices. Evergrande’s offshore bonds continued to trade at about a quarter of their face value, according to data provider Duration Finance. The company’s shares finished down 7.75% on the day in Hong Kong at HK$3.570 after Goldman Sachs cut the company to “sell” from “neutral” and reduced its price target for Evergrande shares to HK$3.0 from HK$15.60. “We expect the company’s deleveraging path to be bumpy, which could lead to deep price discounts for its property sales and potential asset disposal,” Goldman Sachs analysts said. Evergrande shares have fallen more than 18% this month, and more than 76% this year. The company said last week that it faces default risks if it fails to resume construction, dispose of more assets and renew loans. $1 = 6.4585 Chinese yuan Reporting by Andrew Galbraith; Editing by Christian Schmollinger and Ana Nicolaci da Costa Our Standards: The Thomson Reuters Trust Principles.