Evergrande dominoes spawn with 206 million new holes in Chinese real estate – Markets

The earthquake triggered by consecutive defaults by Evergrande, the Chinese real estate giant, has left several aftershocks in an industry that has grown “faster than the shadow itself” in recent years. Now it’s rival Fantasia Holdings’ turn to fail to make a $206 million coupon payment that expired yesterday, October 4, to its creditors.

The company went to market 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 repay all the debts purchased by the creditors, together with the adjacent interest. Of the total, $205.7 million remains to be paid, which, if all goes as the company was contracted five years ago, will be paid on Monday. But they weren’t. The company told the Hong Kong Stock Exchange that it “did not pay the amount on time”.

Fantasia bond prices fell sharply on Monday and maintained the trend on Tuesday with increasing speculation that it will struggle to meet its bonds. The company is among the worst performers in last month’s Bloomberg Index that brings together China’s largest companies with dollar-denominated bonds, and the situation has reached the point where several banks such as Citigroup or Credit Suisse have stopped accepting their debt as collateral, in the previous month. Fantasia’s failure highlights signs of nervousness in China’s real estate sector after Evergrande missed two consecutive payments to its creditors in total. $83.5 million and has a debt of $305 billion. last week, The group announced the sale of 19.93% of the shares of commercial bank Shengjing Bank to a state-owned group for 9,993 million yuan (€1,322 million) and will now sell more than half of the stake in its management. A real estate company for the Chinese developer Hopson also, For more than 5 billion dollars.However, the potential downfall of Fantasia poses less risk to the markets than Evergrande, given the small size of its business and debt. Evergrande’s total debt is $304 billion, while Fantasia’s total is $12.9 billion, according to the company’s report for the first quarter of this year.

In addition to these two listed companies, there is another company in the sector, namely Sinic Holdings Group failed to pay $6 million to its investors, who are now requesting a down payment on other vouchers that expire later, totaling $75.4 million. China’s bond market, whose debt is deemed “junk” by rating agencies, hit its lowest level in 2013.

But the debt of Chinese companies, and not just the real estate sector, is increasing every year. At the end of 2020, the ratio of corporate debt in terms of gross domestic product (GDP) was 224%, compared to less than 100% in the 2007-2008 major global financial crisis.