Evergrande misses its due bond payment which has raised some concerns beyond the crisis
The late payment by the companies has also raised some concerns about the company’s capability to repay all of its maturities amount on a timely basis
There have been growing signs of tensions and stress in China’s property and real-estate market after one of the largest developers “Evergrande” has failed in making a bond payment today. Ratings agencies have all down rated the Chinese developers Sinic Holdings and Fantasia Holdings over the growing risks arising from restricted cash flow situations. Fantasia was not able to repay a bond that had a maturity on past Monday, it stated in a filing provided to the Hong Kong exchange.
The fallout from Fantasia Holdings, however, is anticipated to be much lower than that of the Evergrande. The Chinese Property dealer Evergrande happens to be the world’s most indebted real estate developer having liabilities worth of about USD 300 billion, whereas Fantasia has a total liability of about USD 12.7 billion, according to the first-half financial reports. Fitch Ratings stated that they had downgraded Fantasia Holdings from a “B” to “CCC-” while stating that the company’s cash flow situation could get much restricted than expected hitherto. The “CCC” ratings indicates substantial credit risk, with a high possibility of defaulting. “B” rating suggests that some material default risk is there, however, a limited safety margin is present.
The late payment by the companies has also raised some concerns about the company’s capability to repay all of its maturities amount on a timely basis. Additionally, the incident is also casting some doubt over the transparency of the company’s financial statements. China’s property sector has now received some spotlight as the debt issues of Evergrande has started surfacing. Evergrande that happens to be the second-largest real property developer in China in terms of sales has issued a warning twice it could go into default, which has raised some worries for investors. The company has been missing interest payments over two U.S.-dollar offshore bonds, and has been struggling to raise more funds to pay off its investors and suppliers.
