Fantasia Chairperson Pan Jun poses for a photo at the Four Seasons Hotel in Hong Kong in 2016.
In a statement that is likely to bring new doubts regarding the financial health and the integrity of China’s real estate industry, Developer Fantasia Holdings said late Monday it wasn’t paid the amount of debt due on that day. On Monday, Fitch Ratings downgraded Fantasia’s rating to ‘CCC+’ from B after the media reported that Fantasia was late paying an issue of a bond worth $100 million due September. 28. “The bond was insured through the firm. However, it isn’t evident that the bond’s guarantees be reported in the financial statements of the company,” Fitch said. “According to the company, it transferred the money into the account that was relevant on September 28. The bondholders received the funds within the next day.”
“We believe that the fact that these bonds exist indicates that the liquidity may be more strained than we anticipated. The payment was late also creates doubts regarding the ability of the company to pay its dues on time. Additionally, this event is a hindrance to the accuracy of the financial statements provided by the company.”
“As at the time of this article, Fitch has been unable to confirm whether Fantasia has transferred funds needed to repay its bonds in the US dollar due on April 4, 2021. If it break to pay back the bonds, it could result in further rating actions that could be negative.”
Following Fitch’s rating cut at the beginning of this day, Fantasia announced on the evening of Monday that it was still not paying for the debt due in October. 4. Fitch said that the company owns $1.9 billion in offshore bonds and 6.4 billion yuan in offshore debt, unpaid or puttable at 2022’s end.
Fantasia’s troubles come as China Evergrande Group, the world’s largest real estate developer, with more than $305 billion in debt, cannot make the payments due to its creditors, which has sparked turmoil in global capital markets. Hong Kong-traded shares from China Evergrande and its service subsidiary Evergrande Property Services were suspended in Hong Kong on Monday amid reports that China developer Hopson Development, controlled by billionaire Chu Mang Yee will invest $5 billion into Evergrande Services.
On Monday, Hong Kong’s standard Hang Seng index dropped 2.2 percent to its lowest closing in more than one year.
Fantasia’s shares have been halted since September. 29 on the Hong Kong Stock Exchange.
Based on Fantasia’s public statements, Fitch noted yesterday that Fantasia had 200 million dollars of funds stored in accounts offshore at the close of August, “which sufficed to cover all of the US dollar bonds that matured in October.”
“However,” Fitch said on Monday, “the company confirmed to us that USD102 million of the funds were used to pay an unidentified private loan” in September. 28. Fantasia stated that it was planning to transfer the funds required to pay the due amount of $208 million in October. 4. To trustee accounts, “but Fitch was not in a position to determine if it did so.”
The news came after Fitch’s rating cut was made public the previous Monday Fantasia claimed that the balance on the October. 4 debt wasn’t paid. It raises the possibility of another rating cut on its outstanding debts and concerns about the authenticity of other China real sector debt.