Real estate company

Another struggling Chinese real estate company just defaulted

An aerial view shows the Evergrande Changqing community on September 26, 2021 in Wuhan, Hubei Province, China.

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Chinese luxury real estate developer


Fantasia holdings

said he failed to make the US $ 206 million bond payment due on Monday, sparking fears the debt problems among China’s real estate development companies extend far beyond


China Evergrande
.

Shenzhen-based Fantasia issued a $ 500 million 7.375% senior bond in 2016, but failed to repay the outstanding principle when due, she said in an exchange document Monday. Fantasia (ticker: 1777.Hong Kong) invests primarily in luxury real estate developments in metropolitan areas.

“The board of directors and the management of the company will assess the potential impact on the financial position and the cash position of the group under the circumstances”, indicates the file.

Just two weeks earlier, President Pan Jun said in a statement that there had been no delay in the repayment of offshore security notes and that the operational performance of the company was “good with a fund of sufficient turnover and no liquidity problems “.

The company reported revenue of approximately $ 1.7 billion for the first six months of 2021, an increase of 18.5% from the previous year, and net profit of 23.7 millions of dollars. The company said in August that its next steps were to “adhere to the overall philosophy of” reducing total debt, reducing the size of USD bonds, reducing short-term debt and reducing financing costs. “

After Tuesday’s default, Fitch Ratings downgraded the long-term default rating of foreign currency issuers from Fantasia to “RD” (Restricted default) of “CCC-“. RD-rated companies have defaulted on substantial loans but have not yet filed for bankruptcy or liquidation.

The credit rating agency also downgraded the company’s senior unsecured rating and US bond ratings to “C” instead of “CCC-”, as the October default triggered repayments for d ‘other US dollar notes that will become immediately due if the bondholders decide to demand the bonds, the agency said.

Information available on Fantasia’s restructuring plan is limited, but state media and analysts say an emergency response team has been put in place with support from local governments, financial institutions and government agencies. advisory bodies.

Markets fell on September 20 after Chinese real estate giant


Evergrande

(3333.Hong Kong) has missed domestic and foreign loan repayments and interest payments, raising fears the company could collapse and trigger a wave of bankruptcies in China’s indebted Chinese real estate sector.

Evergrande has made progress in restructuring its debt with the help of the Chinese authorities. On September 29, the company announced that it was selling most of its stake in


Shengjing Bank

(2066 Hong Kong), a Hong Kong-listed bank, to a state-owned company for $ 1.55 billion.

Despite the progress, Evergrande has over $ 300 billion in liabilities, and its failure could still pose a risk to Chinese growth. The Hong Kong Stock Exchange on Monday suspended trading in Evergrande shares “pending the publication by the company of an announcement containing inside information about a major transaction.” The


Hang Seng Index

was down 2% after Evergrande’s announcement, dropping to its lowest level in a year.

Fantasia’s flaw is expected to have a reduced impact on markets due to its smaller size. The HSI rose 0.3% on Tuesday, closing at 24,104.15.

Write to Sabrina Escobar at sabrina.escobar@barrons.com


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