Evergrande contagion spreads: Another Chinese developer defaults

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Evergrande contagion spreads: Another Chinese developer defaults

 Evergrande contagion spreads: Another Chinese developer defaults
Image source: A person holding smartphone with logo of Chinese developer – Evergrande Group -- on screen. © Timons

Highlights

  • The China Evergrande fiasco seems to be spreading.
  • Chinese developers Fantasia Holdings and Sinic Holdings are in soup over their strained cash flow situations.
  • Fantasia has total liabilities of CNY82.9 billion.

The stress emanating out of embattled Chinese property developer China Evergrande Group seems to have rippled out to other players in the sector with yet another player failing to make repayment.

Credit rating agencies have downgraded Chinese developers Fantasia Holdings and Sinic Holdings on concerns of risks from their strained cash flow situations.

Fantasia did not fulfil its obligation on repaying a bond that matured on Monday, it said in a filing to the Hong Kong exchange.

The firm has halted trading of its shares since September 9 until further notice, it said. Fantasia shares have plummeted by little over 55% year-to-date.

Despite the stress in their books, the fallout from Fantasia, however, would be small compared with Evergrande – the world’s most indebted property developer with liabilities worth US$300 billion, while Fantasia has total liabilities of CNY82.9 billion (US$12.8 billion), according to its first-half financial statement.

Meanwhile, Fitch Ratings on Monday downgraded Fantasia to “CCC-” from “B,” saying the firm’s cash flow situation “could be tighter than we previously expected.” According to its website, “CCC” means “substantial credit risk,” with a “real possibility” of default.“B” rating means material default risk is present, but a limited margin of safety remains.

In a report released before the company’s filing on Monday night, Fitch highlighted the existence of a private bond that was not disclosed in the firm’s financial reports and said Fantasia had made a late payment of US$100 million due on this bond.

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