Dhe crisis of the shaky Chinese real estate group China Evergrande is spreading more and more circles in the Middle Kingdom. The also sluggish Chinese real estate developer Fantasia restricted trading in its bonds on Monday after a credit rating downgrade in Shanghai. In addition, the smaller real estate developer Modern Land announced that it would ask investors to postpone a repayment date for outstanding bond debts.
The steps taken by the two companies make it clear what wave the Evergrande crisis is now making in the Chinese real estate industry. Evergrande has more than $ 300 billion in debt, of which nearly $ 150 million in foreign debt is due soon. Donors are already preparing for imminent payment defaults.
For many non-governmental Chinese real estate developers, it is now a matter of surviving the next three months, says real estate analyst Cai Hongfei of brokerage firm Central Wealth Securities. “Asking you about your repayment plan in six to twelve months is a question you simply cannot answer.”
The stock exchange is no longer responsible for Fantasia bonds
The Fantasia bonds are now only supposed to change hands after negotiations. The rating agency China Chengxin International Credit Rating (CCXI) had previously downgraded the stocks. So far these have been traded on the Shanghai Stock Exchange. Two Fantasia bonds were suspended from trading on Friday after parent company Fantasia Holdings missed the $ 206 million bond repayment deadline on October 4th. Most Fantasia bonds have already lost around 80 percent of their value.
The smaller real estate company Modern Land said it would ask investors to postpone the due date for a dollar bond that expires on October 25 by three months. In this way, insolvency should be avoided.
The crisis in Evergrande and the Chinese real estate market has been dragging on for several weeks. On the one hand, many observers believe that even a collapse of the Chinese mega-corporation would be very limited to China and not necessarily have to spread to other economies. On the other hand, much still seems to be in the dark, and the connections between non-Chinese companies and especially financial institutions are more than unclear.
Few contacts between banks and Evergrande are known
Officially, very few companies and banks want to confirm ties to Evergrande. If so, then the financial interdependencies are rather minimal. In fact, the data on Evergrande is likely to be very thin. Until a few weeks ago, very few had heard of Evergrande.
Evergrande is not just a real estate company, but a conglomerate that also includes solar panels or a football club. China Evergrande’s share price has fallen more than 95 percent in the past few months.