Chinese luxury real estate developer
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
Shenzhen-based Fantasia issued a $ 500 million 7.375% senior bond in 2016, but failed to repay the outstanding principle when due, it said in a Monday swap dossier. 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 press release there was no delay in the repayment of the offshore security notes, and the operational performance of the company was “good with sufficient working capital and no liquidity issues”.
The company reported revenue of approximately $ 1.7 billion for the first six months of 2021, an increase of 18.5% over the previous year, and net income of $ 23.7 million. 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 the default for Tuesday, Fitch Ratings downgraded Long-term default rating of foreign currency issuers from Fantasia to âRDâ (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 âCâ from âCCC-â as the October default triggered repayments for others. US dollar notes that will become immediately due if 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
(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 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
(2066 Hong Kong), a Hong Kong-listed bank, to a state-owned company for $ 1.55 billion.
Despite the progress, Evergrande has more than $ 300 billion in liabilities, and its failure could still pose a risk to Chinese growth. The Hong Kong Stock Exchange suspended trading in Evergrande shares on Monday “pending the company’s publication of an announcement containing inside information about a major transaction.” The
Hang Seng Index
was down 2% after Evergrande’s announcement, falling to a year-old low.
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 [email protected]