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Chinese developer Fantasia limits trading in its bonds following downgrade

Chinese developer Fantasia limits trading in its bonds following downgrade

Empty lobby of Fantasia Properties is seen as it is closed for the National Day holidays in Beijing, China on Oct 5, 2021. (Photo: AP/Ng Han Guan)

SHANGHAI: Cash-strapped property developer Fantasia Group China said on Monday (Oct 11) it will limit trading in its Shanghai bonds, a move seen to be aimed at curbing volatility, following a credit downgrade.

Fantasia, controlled by Hong Kong-listed Fantasia Holdings Group, said its bonds will now only change hands through negotiations, after a downgrade by China Chengxin International Credit Rating (CCXI).

They previously traded on an auction system at the Shanghai Stock Exchange.

Traders said changes in the trading mechanism by Chinese issuers - often ahead of defaults in their bonds - are likely aimed at limiting participation and curbing volatility. Fantasia's Shanghai-traded bonds slumped on Friday.

Cai Hongfei, property analyst at Central Wealth Securities, said the changes could reflect a desire to protect investors as many Chinese developers face an uncertain future.

For many non-state-owned Chinese developers, the goal is to survive the next three months, he said. "Asking about their repayment plan in six to 12 months is a question they simply cannot answer."

Hengda Real Estate Group, the flagship unit of embattled China Evergrande Group, also adjusted the way its onshore bonds are traded, turning from auctions to negotiated transactions since mid-Sep.

Evergrande, which could trigger one of China's largest defaults as it wrestles with debts of more than US$300 billion and whose troubles have already sent shockwaves across global markets, missed payments on dollar bonds, worth a combined US$131 million, that were due on Sep 23 and Sep 29.

Evergrande has other bond coupon payments totalling more than US$148 million due on Monday.

Two bonds of Fantasia Group were suspended from trading by the Shanghai Stock Exchange on Friday, with one dropping more than 50 per cent, after Fantasia Holdings missed the deadline on a US$206 million international market debt payment on Oct 4.

Fantasia Holdings said in a Hong Kong filing on Friday that it had appointed Houlihan Lokey and Sidley Austin as its advisers to assess its capital structure, evaluate liquidity and explore solutions to ease its current liquidity issue.

Fantasia Group added in the Monday statement that the group plans to enhance its short-term repayment ability by disposing assets.

Most of Evergrande's and Fantasia's bonds have already lost around 80 per cent of their value.

Source: Reuters/ng

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