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China’s real estate crisis intensifies as another developer misses payment deadline

China's real estate crisis intensifies as another developer misses payment deadline

Following the debt crisis that has befallen Chinese real estate behemoth Evergrande, a developer of luxury flats, Fantasia Holdings Group, has also failed to make bondholders by not repaying $205 million in debt according to the South China Morning Post.

It was revealed to the Hong Kong stock exchange that the Shenzhen-based property developer had not made the dollar bond payment due on October 4. Fantasia had previously stated that it had “sufficient working capital and no liquidity issue.” 

Additionally, property management business Country Garden Services Holdings reported a unit of Fantasia failed to repay a $108 million loan that was also due on Monday, resulting in the company issuing a notice of potential default.

Trading of the company shares was forced to suspend on September 9 until further notice, and it has not resumed since then. Due to concerns associated with the company’s constrained cash flow, rating agencies lowered the group’s rating.

Fantasia stock on the decline

Furthermore, since the beginning of the year, Fantasia’s stock has decreased by around 60%. Following the recent developments, the company’s dollar-denominated bonds fell by more than 5 cents to new record lows on the back of the latest news. 

In addition to international bond payments of approximately $2 billion due between now and the end of next year, Fantasia has roughly $1 billion in local bond payments due between now and the end of next year, according to Fitch estimates.

With a market value of $415 million, Fantasia is a significantly smaller company than China Evergrande; nonetheless, the failure of the company to repay a maturing bond is viewed as a clear indication of a rising crisis in China’s real estate sector.

Evergrande to sell 20% of its bank shares

It’s worth mentioning that on Wednesday, September 29, it was announced a Chinese state-owned company agreed to buy the majority of China Evergrande Group’s stake in a commercial bank. 

Hence, the latest indication that Chinese authorities are working to help the property giant resolve some of its financial difficulties as the real estate titan has been seeking to obtain money to pay off its hefty $300 billion debt. 

By way of explanation, Evergrande revealed in a Hong Kong stock exchange filing on Wednesday that it will sell to Shenyang Shengjing Finance Investment Group for 5.70 yuan per share of the 1.75 billion shares or 19.93% ownership in Shengjing Bank that it now holds. 

Thus, Shenyang Shengjing would have a 20.79% share in Shengjing Bank after completing the purchase, making it the lender’s largest stakeholder.


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