Tag Archives: Fantasia Holdings

Contagion Fears Will Intensify As China’s Property Debt Woes Widen

A THIRD WEEK; a third round of missed bond payments by beleaguered property group Evergrande.

Reports say the group missed coupon payments totalling $148 million due today. That follows two sets of payments missed in September. The clock is ticking down on the 30-day grace period on the first of them before a default must be declared.

The developer has more than $300 billion in liabilities.

The fear is of the debt crisis spreading to other developers. A total of $92.3 billion of bonds issued by Chinese developers fall due over the next twelve months. Developers with weak credit ratings are already finding refinancing their debt next to impossible.

Fantasia Holdings, a mid-sized developer based in Shenzhen, has already defaulted on $206 million in payments due. Sinic Holdings, which develops residential and commercial property across China, told the Hong Kong Stock Exchange on October 11 that it would likely default on a bond payment due on the 18th of this month. Beijing-based Modern Land is asking its bondholders to extend payment-due deadlines by three months.

If the sector’s liquidity problems do not improve, further defaults seem inevitable. The question would then become how much contagion there would be in the rest of the economy, of which real estate accounts for a quarter.

Managing a soft landing for the sector’s most troubled companies without making an overt bailout remains a high priority for authorities. More measures at the municipal and provincial level to support developers, such as Harbin’s release of presale funds held in government escrow accounts to ease cash flows, are likely.

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