The crisis of Chinese real estate companies is worsening. After the debt-laden Evergrande group tore up bond interest payment deadlines and the stock was suspended from trading in Hong Kong earlier this week, little rival Fantasia, which is also listed in the former British crown colony, also missed a deadline for interest payments. In addition, the rating agencies have downgraded the solvency of property developer Sinic and warned against defaults. The prices of a number of real estate companies fell on Wednesday in Hong Kong and bonds were also sold.
Fantasia failed to pay bond interest of $ 206 million due Monday, the company said in a mandatory announcement. In addition, a Fantasia subsidiary was unable to service a $ 108 million loan to property manager Country Garden Services. Fitch then lowered Fantasia’s rating several notches. The rating of competitor Sinic was downgraded by Fitch and S&P Global. Sinic is in a serious liquidity crisis and the debt service capacity is almost exhausted, S&P experts have justified the downgrading of their rating. By mid-October, Sinic’s bond yields of $ 246 million will be due.
Real estate companies Sinic and Fantasia are significantly smaller than Evergrande, but their problems fuel investor fears that the Chinese real estate bubble is about to burst and affect other sectors. “It’s a vicious cycle for real estate developers who are not strong enough because there is not enough liquidity in the market for everyone,” warns Thomas Kwok, head of actions at the brokerage firm Chief Securities .
Many real estate companies in China are currently no longer obtaining loans to refinance themselves, and the ability to generate capital through the sale of real estate has recently declined significantly. Many investors now assume that Beijing officials will support Chinese buyers who prepaid money at Evergrande to build an apartment, but institutional investors who took out bonds could get away with nothing.
Evergrande is China’s second-largest real estate developer and has over $ 300 billion in debt. With $ 5 billion, the company could theoretically honor its obligations to its creditors within the next six months. About $ 500 million in interest will be due on the bonds by the end of 2021. In March, the repayment of a $ 2 billion bond is due.