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China: Another property developer, Fantasia, faces bankruptcy

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Following Evergrande Group, another Chinese property developer has failed to pay interest on its bonds. Further disrupting the Chinese property market.

fantasia group holdings to default

According to Forbes, Fantasia (Fantasia Holdings Group) failed to settle interest on a $25.7 million debt. “China, with a high mortgage rate, is under increasing pressure”.

Additionally, Country Garden Service, a property management company and subsidiary of Fantasia, failed to repay a $108 million loan the same day.

Fears of Fantasia’s bankruptcy caused the bond prices to collapse. Dollar-denominated bond with a coupon rate of 6.95 percent fell to 38 cents per dollar of face value.

Fantasia was downgraded by Fitch, an international rating company, to CCC- from B. The agency indicated the company as “not suitable for investment” with a low 4 rating. It further noted that “Repayment of interest may not happen”.

Earlier, Standard & Poor’s (S&P) and Moody’s also downgraded Fantasia and related companies. They warned that “the risk” of not being able to repay maturing bonds in the coming weeks was “increasing.”

Yahoo Finance reported that repaying Fantasia’s bonds and balance, which reduced the company’s market capitalization to $415 million, could harm not only China’s real estate market, but also its economy as a whole.

As bond yields hit a ten-year high, construction companies with low credit ratings came under increased pressure, and this burden is spreading to the Chinese real estate market.

A bankruptcy of Evergrande raises concerns that a strong restructuring wind is blowing in China and is carrying over to the entire market, foreign media reported.

China real estate, a troubled market

There is growing concern about the consequences and potential contagion of Evergrande’s crisis on growth in China. Analysts estimate that China’s real estate sector contributes about 15% to the country’s gross domestic product.

Many Asian high-yield bond funds are also dominated by Chinese property developers.

ICE Bofa High Yield Asia Emerging Markets Corporate Plus Index yields are down -9.89% year-to-date, according to Refinitiv Eikon.

For MetaNews.

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Jonathan Hobbs

Jonathan Hobbs is an Australian investor and author that trades on a variety of asset classes, including currencies, equities, and commodities. Jonathan’s experience as a macro trader leverages his unique writing style to combine important elements, such as technical analysis and news. The other elements that he brings into his unique writing styles are foundation analysis aimed at rational equilibrium values, evaluating the sizes and motivations of buyers and sellers, as well as identifying the needs of the buyers and sellers in the individual markets. Jonathan is committed to quality writing for new traders as well as veterans.

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