Fantasia Shares Plunge, Payment Test Looms: Evergrande Update

(Bloomberg) -- Shares of troubled Chinese developer Fantasia Holdings Group Co. plunged as much as 52% in Hong Kong, resuming trading after a six-week halt and the company’s surprise default. 

Meanwhile, China Evergrande Group faces its biggest payment test yet Wednesday with $148.1 million of coupon payments due on three dollar bonds as 30-day grace periods end. Also, Securities Times reported that China is considering rule changes to make it easier for developers to sell debt and Evergrande’s electric-vehicle unit sold shares at a discount.

Borrowing costs continue to soar for junk-rated firms and even high-quality borrowers, which are suffering their worst selloff in about seven months. A Bloomberg total return index for the high-yield market dropped 11 of the last 12 trading days through Tuesday, putting yields at 24.6%. Evergrande’s 8.75% note maturing in 2025 had fallen four straight sessions, cutting its price to about 24 cents on the dollar Tuesday. The firm’s stock has plunged 85% this year.

Key Developments:

Fantasia Plunges After Month-Long Trading Halt (9:35 a.m. HK)

Fantasia shares opened 50% lower at HK$0.28 in Hong Kong after trading was suspended for more than a month. The developer’s woes have been mounting after two directors quit the troubled Chinese developer last month and it defaulted on a dollar bond. 

Evergrande Faces Payment Test as Grace Periods End (8:20 a.m. HK)

Evergrande is facing its biggest payment test since signs of a liquidity crisis emerged at the firm five months ago. 

Investors are waiting to see if the embattled developer makes coupon payments totaling $148.1 million for three dollar bonds before the end of 30-day grace periods Wednesday. Evergrande missed the initial interest deadlines last month, Bloomberg-compiled data show.  

The due date looms as credit-market stress spreads beyond China’s junk-rated builders. Higher-quality dollar bonds are suffering their worst selloff in months, as investors grow increasingly concerned about the impact on larger property firms and the broader economy. 

While there’s been no indication that Evergrande will miss the payment, any such development could also trigger cross-default clauses among the builder’s $19.2 billion of outstanding dollar notes and give creditors more room to negotiate.  

Developer CIFI Plans Rights Issue After Bond Market Shuts (8:15 a.m. HK)

With the bond market all but closed for China’s embattled real-estate industry, one developer is tapping shareholders for fresh capital to weather the storm.

The planned rights issue from Hong Kong-listed CIFI Holdings Group Co. offers a potential funding road map for Chinese property companies with highly concentrated ownership. CIFI, led by Chairman Lin Zhong, is seeking to raise as much as HK$1.68 billion ($216 million), according to a filing Tuesday.

Rules for China Developers to Issue Bonds May Be Eased: Report (8 a.m. HK)

Relevant policies for real estate enterprises to issue domestic bonds may be loosened, with developers expected to kick off issuance in the interbank market in the near future, the official Shenzhen-based Securities Times says in a front-page report, citing unidentified bond market sources.

• Note: Some Chinese Property Developers Plan Interbank Bond Sale: News
• The convening of the symposium this week means that authorities may ease the control on bond issuance by developers: report

Evergrande NEV to Raise HK$500m in Stock at Discount (8:10 a.m. HK)

China Evergrande New Vehicle Group Ltd. entered an agreement to place 174.8 million new shares at HK$2.86 apiece in a top-up placement, according to a statement to the Hong Kong stock exchange. The sale would raise about HK$500 million, and the offer price represents about a 20% discount to Tuesday’s closing price.

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