NEW YORK (BLOOMBERG) – Another Chinese developer fell into crisis on Monday (Oct 4) after failing to repay a maturing bond, adding to the strains of the nation’s heavily leveraged property firms following industry giant China Evergrande Group’s debt woes.
Fantasia Holdings Group did not repay a US$205.7 million (S$279 million) bond that was due on Monday, according to a company statement. Separately, property management company Country Garden Services Holdings said that a unit of Fantasia did not repay a 700 million yuan (S$147.4 million) loan that also came due on Monday and that a default was probable.
Prices on the builder’s bonds tumbled earlier on Monday as speculation mounted that it would struggle to meet its obligations. The company’s 6.95 per cent of US dollar-denominated notes due in December plunged nearly 30 US cents on the dollar to 38 US cents, according to the bond-price reporting system Trace.
Shenzhen-headquartered Fantasia’s management and board “will assess the potential impact on the financial condition and cash position of the Group” stemming from the skipped bond payment, it said.
Country Garden Services announced an agreement last month to acquire the property management business assets from Fantasia’s Colour Life Services Group. Country Garden said on Monday that it was enforcing a provision in the deal that would transfer shares of the Fantasia unit to one of Country Garden’s companies.
Signs of stress within China’s property sector are spreading, as lower-rated developers face a surge in bond yields to a decade high. Evergrande, the world’s most indebted developer, is stumbling towards what could be one of the nation’s biggest restructurings and fueling concern about wider market contagion.
The government has maintained strict rules on leverage, while measures to cool the housing market are damping sales. Recent days have brought more examples of stress at other property firms. Sinic Holdings Group has received a demand to repay some debt after missing two local interest payments.
Fitch Ratings followed its peers on Monday by cutting Fantasia’s credit grade several notches to CCC-, deep into junk territory. S&P Global Ratings lowered its long-term rating on Fantasia on Sept 29 to CCC from B, citing “elevated risk” that it may not be able to implement a concrete repayment plan over the next several weeks for upcoming maturities. Moody’s Investors Service also cut its rating by one notch to B3.
Fantasia said last week it had wired principal and interest on a US$100 million privately placed bond, refuting a report that funds had not been transferred.