Chinese property developer Fantasia defaults on $205 million bond

Key Points

• Fantasia failed to repay $205.7 million bonds, adding worries to China’s property development industry

• Country Garden said Fantasia failed to pay $108 million for bond repayment

• Fitch downgraded Fantasia’s rating from CCC- to B

Another Chinese property developer failed to repay the debt on Monday, adding distress to the nation’s heavily leveraged industry following Evergrande Group’s debt woes.

Fantasia Holdings Group failed to repay a $205.7 million bond that was due Monday, and in a filing to Hong Kong’s stock exchange, the company said, “Under the indenture governing the 2021 notes, all outstanding principal amount of the 2021 notes shall be due on 4 October 2021.”

Moreover, Country Garden Services Holdings, a Hong Kong-listed property management company, said that a unit of Fantasia also failed to repay the principal amount on a 700 million yuan ($108 million) bond on Monday, and default by Fantasia is probable.

The Shenzhen-based property developer’s shares remained suspended on Monday in Hong Kong since September 29, and Country Garden’s shares were down about 4.8% in Hong Kong on Tuesday.

“The company did not make the payment on that day. The board and the management of the company will assess the potential impact on the financial condition and cash position of the group under the circumstances,” Fantasia said in the filings.

The default will add to fears about the financial health of the Chinese property sector.

Read More: What is Evergrande crisis? Why are world markets jittery over Chinese group’s likely default?

Defaulting on bond repayment

Fantasia issued the $500 million senior note in September 2016 and carried a 7.375% interest rate, due this month. The company bought back some of the notes some months back, the remaining unpaid amount came to $205.65 million.

The bond prospectus specifies an event of default when the principal is not repaid when the bond matures, while the interest payment carries a 30-day grace period.

Fitch Ratings downgraded Fantasia’s long-term foreign-currency issuer rating to “CCC-” from “B”, citing the risk of default on its upcoming US dollar bonds, tighter than expected offshore liquidity, and lack of transparency.

“Fantasia said it intends to transfer funds needed to repay the [US$205 million] due on 4 October 2021 to the trustee accounts, but Fitch has not been able to ascertain if it has done so,” the agency said on Monday.

Picture Credit: CTV News