Another Evergrande? Fantasia Holdings Defaults!

Patrick Boyle On Finance

Patrick Boyle

Investing, Business

4.9 • 320 Ratings

🗓️ 9 October 2021

⏱️ 10 minutes

🔗️ Recording | iTunes | RSS

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Summary

Send us a textOn the heels of Evergrande’s debt crisis, there are increasing signs of stress in China’s real estate market after Fantasia Holdings failed to make a bond payment.Fantasia Holdings, a Chinese developer of luxury apartments missed $315 million in payments to lenders on Monday, sparking fears that financial strains in the country's outsized property sector are spreading beyond the troubled Evergrande conglomerate.Fantasia Holdings, a Shenzhen-based developer, missed repaying $206 ...

Transcript

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0:00.0	Hello and welcome. You are listening to Patrick Boyle on Finance, a podcast exploring ideas from quantitative finance, examining events occurring in markets right now and financial history to see what lessons can be taken away, including interviews with some of the most interesting people in the world of finance. To learn more about the podcast, visit onfinance.org.
0:27.2	Welcome back, everyone. A quick update on Evergrand and the Chinese property developer
0:32.9	defaults that we are seeing right now. So yesterday there was an announcement that Evergrand shares were being suspended, possibly
0:41.3	pending a corporate action.
0:43.3	And then in this morning's news we have another Chinese real estate developer Fantasia Holdings
0:49.3	who've missed a bond payment.
0:51.3	So let's quickly go over this Fantasia story, discuss what the Evergrand
0:56.0	share suspension means, and look at just how leverage the Chinese real estate sector is and how
1:02.6	capable these real estate developers are of making the payments on their debt. As I mentioned,
1:09.4	Fantasia Holdings, a mid-sized Chinese property developer,
1:13.1	made a stock exchange filing last night stating that they did not make the payment on Monday of a $206 million bond that was maturing that day.
1:23.6	Now, this missed payment is classified as a formal default, unlike Evergrand's late payment
1:29.9	from a bit over a week ago. One of the worrying parts of this story is that Fantasia just a few
1:36.1	weeks ago assured investors that it had no liquidity issues. I won't make any jokes about them
1:42.4	been named Fantasia just because that's too easy.
1:45.7	Now obviously this default adds to fears that the Evergrand crisis or the Chinese real estate
1:51.6	crisis will spread to include many more Chinese property developers. These developers
1:57.6	account for a huge portion of the Asian high-yield bond market.
2:01.9	As I mentioned in my prior videos, Chinese real estate developers have been under significant
2:07.2	pressure from Beijing for a bit over a year to reduce leverage after decades of debt-driven
2:13.5	growth.
2:14.5	And this property sector growth was key to some of the huge growth figures that
	...

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