Fantasia – China’s next real estate bond “debt bomb” explodes

Fantasia – China’s next real estate bond “debt bomb” explodes

China’s Fantasia Holdings Group, a real estate developer, could not buy back more than $205 million in bonds due on October 4 and failed to repay a short-term loan of more than $108 million.

Buying a house in Shenzhen, Beijing is considered “harder than going to heaven” by many Chinese people because the price is too high

While the $ 300 billion Evergrande bond bomb that shocked global financial markets has not yet found a way out, Chinese homebuyers continue to be shaken by the newly discovered real estate bond bombs.

According to Nikkei Asia sources, Fantasi Holdings Group was unable to buy back $205.7 million of corporate bonds that matured on October 4. At the same time, this Chinese real estate group also failed to repay a short-term loan of 700 million yuan ($108.56 million).

According to the bond offering prospectus, Fantasia has a 30-day grace period to arrange to buy back the bonds, to pay the bondholders or else it will be declared insolvent.

Reportedly, Fantasia Group, founded by the niece of former Vice President of China, Zeng Qinghong, has $762 million in international bond debt due this year and an additional $1.15 billion. worth of bonds maturing in 2022, not to mention 6.4 billion yuan of domestic bonds.

On October 4, credit rating agency Fitch Ratings downgraded Fantasia’s rating to “CCC”. Previously, S&P shortened the score to “CCC” from “B” on September 29. Moody’s also cut the rating to “B3” last month.

In a row, many Chinese real estate developers fell into a liquidity crisis after the regulator tightened management along the “three red lines”. Specifically, the debt-to-asset ratio is less than 70%, the net-payment ratio is less than 100%, and the cash-to-short-term debt ratio is greater than 1. If developers fail to meet one, two, or both three red lines, regulators will set limits on possible debt ratios.

Dr. Le Xuan Nghia, an economist, said that China’s Evergrande and Fantasia Holdings Group debt bombs are a warning for Vietnam’s real estate market. According to this expert, compared to China’s corporate bond market, Vietnam’s corporate bond market is less transparent (because it doesn’t need a credit rating, is easy to issue, has unclear guarantees, etc.) .

According to this expert, financial situation of many Real estate enterprises issuing corporate bonds in the past time have been likened to a “fog layer”, especially the “backyard” corporations of banks.

However, many experts believe that the possibility of the collapse of the real estate bond market in Vietnam is not as ominous as China’s, partly because Vietnam’s real estate prices are not as high as unreasonable. In China, on the other hand, the urbanization rate in Vietnam is still low compared to the region.