Chinese Developer Fantasia Says Lenders Seek Repayment; Shares Plunge
Company says it is still working with advisers on its liquidity problems
Fantasia Holdings Group Co., the property developer whose surprise bond default last month helped heighten market concerns about Chinese real estate, said some lenders were asking for loans to be repaid early.
The company’s stock, which resumed trading after being halted since late September, plunged 37% Wednesday in Hong Kong to 36 Hong Kong cents a share, the equivalent of about 5 U.S. cents. That put the stock on course for its lowest close in its 12-year history, according to FactSet.
“The company has received notices from certain lenders requesting repayment for loans that are not due,” Fantasia said late Tuesday, adding that it was talking to these lenders about settlement arrangements.
Fantasia added that it was still working with advisers from Houlihan Lokey HLI 0.62% (China) Ltd. and Sidley Austin on its liquidity problems. “The group will continue to implement measures to ease its liquidity issue,” it said, adding that the company’s business could suffer if it failed to repay debt on time or couldn’t reach agreements with creditors.
The Shenzhen-based developer last month failed to repay about $205.7 million of principal due on a maturing bond. It is one of at least six Chinese developers that have recently either defaulted on their debt or asked investors to wait longer for repayment.
Fantasia is also dealing with a steep decline in sales. Last week, it said contracted sales for October totaled about 2.11 billion yuan—the equivalent of about $330 million, and a roughly 62% fall versus the same month a year earlier.
Fantasia was founded in 1996 by Zeng Jie, also known as Baby Zeng, a niece of former Chinese Vice President Zeng Qinghong. The company is known for building high-end residential projects and luxury apartments. Fantasia has dozens of real-estate projects in major metropolitan areas across China, in cities including Beijing, Wuhan, Tianjin and Ningbo.
Fantasia’s 9.875% bonds due 2023 were quoted at 30.5 cents on the dollar on Wednesday in Hong Kong, according to Tradeweb, not far off record lows plumbed late last month. Fantasia has dollar bonds with a face value of about $1.7 billion due between December and the end of next year, according to an October report from Moody’s Investors Service.
More broadly, investors have dumped Chinese property debt, pushing down prices and sending yields soaring. The yield on an ICE BofA index of dollar-denominated Chinese junk bonds, which is dominated by developers, last week leapt above 25% for the first time since the global financial crisis. It stood at 27.9% as of Tuesday’s close.
Kaisa Group Holdings Ltd. , a major borrower in international markets, has become a recent focus of concern after revealing it was on the hook to pay off investors in investment vehicles known as wealth-management products, which it had guaranteed. Earlier this week, Kaisa apologized to investors, pleading for patience and saying it would speed up asset disposals.
In a subsequent statement late Tuesday, Kaisa said that a subsidiary had guaranteed WMPs issued by a company called Shenzhen Jinheng Wealth Management Co., and that Jinheng hadn’t paid back investors when the products came due. Kaisa said it was “ascertaining the amount involved and exploring remedial measures to address the issue.”
While the selloff was initially centered on China Evergrande Group and other developers with lower credit ratings, it has recently widened to include financially stronger developers, which in many cases are also reporting falling sales.
On Wednesday, S&P Global Ratings downgraded Shimao Group Holdings Ltd. , one of China’s larger developers, to junk, saying “challenging operating conditions” mean Shimao’s sales would be weaker than it had previously forecast. S&P cut Shimao by one notch to BB+ and said its outlook on the rating was negative. Shimao’s contracted sales dropped 32% year-over-year in October.