It appears that Evergrande is not the only rotten apple plaguing China’s real estate sector.
Another Chinese developer has succumbed to the real estate liquidity crisis, after failing to make a debt payment this week on a maturing bond. According to a company statement, Fantasia Holdings Group Co. did not make a $205.7 million interest payment on a bond due October 4. The company also failed to repay a separate $108 million loan that was also due Monday, sparking concerns that a default is more than imminent.
However, Fantasia poses less risk to global financial markets due to its size— as of June 30 its liabilities stood at $12.9 billion relative to Evergrande’s surmounting debt pile of $304.5 billion, while its outstanding domestic and offshore bonds stood at $4.7 billion versus Evergrande’s $27.6 billion. Despite this, however, Fantasia’s bonds were still sent plummeting on Monday, as concerns began to mount over the company’s apparent lack of meeting debt obligations.
Shares of Fantasia are now down 60% since the beginning of the year, while Fitch Ratings estimates the company faces about $2 billion in offshore bond payments and about $1 billion in local interest payments due between October through to the end of 2022. The latest news also prompted Fitch to downgrade Fantasia’s credit rating to CCC-, which is well below the threshold of junk bonds.
Indeed, China’s real estate crisis appears to be spiralling out of control, as last week Sunac China Holdings Ltd., another heavily indebted property developer revealed that it too, is suffering from a major liquidity problem and lack of sales of local projects. Evergrande, for its part, continues to be at the forefront of investors’ concerns, after still remaining mum on an announcement regarding a “major transaction” after halting its shares on the Hong Kong Exchange on Monday.
Information for this briefing was found via Bloomberg and the companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.