The earthquake, triggered by successive defaults by Chinese real estate giant Evergrande, is causing several shocks in an industry that has grown “faster than the shadow itself” in recent years. Now it is the turn of rival Fantasia Holdings Group, which has failed to pay its creditors a $ 206 million coupon that expired yesterday, October 4.
The company entered the markets in 2016 to raise $ 500 million from investors around the world in a five-year debt issue. That is, after this period, the real estate agency will have to pay off all this debt, bought by creditors, with the associated interest. Of the total amount, 205.7 million remained to be paid, which, if everything goes according to the company’s contract five years ago, will be paid this Monday. But this is not the case. The company told the Hong Kong Stock Exchange that it “did not make the payment on time.”
Fantasia’s bond prices fell sharply on Monday and are in trend on Tuesday, as rumors rise that the company will struggle to pay off its bonds. The company ranks among the worst performers in the Bloomberg Index for the last month, which brings together China’s largest dollar-denominated companies, and it got to the point where several banks like Citigroup or Credit Suisse stopped accepting their debt as collateral in the previous month. month. Fantasia’s failure underscores signs of stress in China’s real estate sector after Evergrande missed a total of two consecutive payments to its lenders. $ 83.5 million and has a debt of $ 305 billion. Last week, The group announced the sale of a 19.93% stake in Shengjing Bank commercial bank to a state-owned conglomerate for 9,993 million yuan (1,322 million euros) and will now be in the process of selling more than half of its management stake. real estate company also of the Chinese Hopson Development, over 5 billion dollars…However, the potential collapse of Fantasia poses less risk to the markets than Evergrande due to its smaller business size and debt. According to the company’s first quarter report this year, Evergrande’s total debt is $ 304 billion and Fantasia’s is $ 12.9 billion.
Apart from these two listed companies, another company in this sector, Sinic Holdings Group has defaulted on $ 6 million to its investors, who now require prepayment on other coupons, which expire at a later date, totaling $ 75.4 million. China’s bond market, whose debt is considered “junk” by rating agencies, is at its 2013 low.
But the debt of Chinese companies, not just the real estate sector, is growing every year. As of the end of 2020, the percentage of corporate debt to GDP (gross domestic product) was 224%, which is comparable to less than 100% during the great global financial crisis of 2007-2008.
