Fantasia’s shares sink after developer founded by former Chinese vice-president’s niece defaults on bond payment

·3-min read

Shares of Fantasia Holdings Group plunged by almost 40 per cent to a record low on Wednesday, after the debt-laden Chinese developer defaulted on a US dollar bond, further warning there is no guarantee it could meet other financial obligations.

The Hong Kong-listed developer said in a filing late on Tuesday that it did not repay a US$205.7 million bond that was due on October 4. Apart from its 2021 notes, Fantasia said that there were no other overdue bonds and loans of a material nature.

“Given the liquidity issue faced by the group, there is no guarantee that the group will be able to meet its financial obligations under its other financing documents,” the Shenzhen-listed company said in the filing.

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Fantasia was founded in 1996 by Zeng Jie, the niece of former vice-president Zeng Qinghong.

Fantasia said that while it has not received notices from bondholders seeking immediate repayment, certain lenders have requested early repayment of loans that have not yet matured. The developer said it was in talks with these lenders on arrangements, including renewing or extending the loans.

Fantasia’s woes add to the strains of China’s heavily leveraged property developers, first sparked by industry giant China Evergrande Group’s debt woes, which is struggling with liabilities of over US$300 billion. Its missed payment triggered a series of downgrades of Chinese real estate companies by major credit rating companies last week.

Fantasia’s shares, which had suspended since September 29, resumed trading in Hong Kong on Wednesday. They closed 37 per cent lower at HK$0.36.

Fantasia’s missed payment came just two weeks after the company said it had no liquidity issues and had “already prepared the funds” to redeem its bonds due this month. It had obtained HK$1.1 billion (US$142 million) of financing from Chiyu Bank in June, it said at the time.

The liquidity crisis faced by Fantasia and other developers comes after Beijing’s introduction of the “three red lines” last year, designed to tamp down speculative property price bubbles. The requirements adopted by the China’s central bank last August limited developers’ ability to borrow, making it hard for them to cover short-term cash needs between the time flats are built and sold.

The company reported a profit of 302.9 million yuan (US$47.4 million) in the first half, a 9.5 per cent increase from a year earlier. As of June 30, it had current liabilities – those that have to be repaid within a year – of nearly 50 billion yuan, including 8.5 billion yuan in borrowings and nearly 11 billion yuan in senior notes and bonds.

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