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Bond Market News
Fantasia Downgraded Across the Three Rating Agencies
October 6, 2021
Moody’s downgraded Fantasia to Ca from B3 and its notes to C from Caa1, with a negative outlook following the missed payment of the developer’s $205mn bond on October 4 and weak recovery prospects. Moody’s further noted that the downgrade also reflected the inconsistent information Fantasia provided to the market on its exposure of privately placed bonds, raising concerns on the company’s disclosure and governance practices. Repayment risk is elevated as the missed payment could trigger a cross default and accelerate the repayment of the company’s other debt obligations. Moody’s estimates that Fantasia’s unrestricted cash of RMB 27bn ($4.2bn) as of the June 2021 will be insufficient to repay all the debt in full.
S&P downgraded Fantasia to SD (Selective Default) from CCC and its notes to CC from CCC following the non-repayment of their bond on October 4, highlighting its strained liquidity, despite its reported sufficient cash on hand. S&P added that as funding conditions worsened, it is “likely that the cash was utilized for other repayments or was not accessible”. Also, asset disposals have been slow, failing to bring liquidity in-time. Similar to Moody’s, they noted that the nonrepayment will likely trigger cross defaults in its outstanding bonds and could accelerate repayments on other debt with creditors seeking early repayment.
Fitch downgraded Fantasia to RD (Restricted Default) from CCC- following the nonrepayment of their October bond maturity. Fantasia’s senior unsecured and dollar bond ratings were also downgraded to C from CCC-. As with the other rating agencies, Fitch notes that Fantasia’s bond triggered events of default on the company’s other USD notes. The other notes will become “immediately due and payable if the bond trustee or holders of at least 25% in aggregate principal amount of the offshore notes declare so”. Fitch notes that uncertainties over restructuring plans and lack of transparency on undisclosed liabilities only add to the negative impact on its credit profile.
Most of Fantasia’s distressed dollar bonds are trading at 20 cents on the dollar while its bonds due December 2021 are at 37 cents on the dollar.
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