Developer Fantasia signs 36-month pact with Hangzhou firm to revive fortunes

Struggling Fantasia Holdings Group has signed an initial agreement with a Hangzhou-based property services company that could help the mainland Chinese developer alleviate its liquidity pressure and step up its debt-restructuring pace.

Fantasia Group (China), a wholly owned subsidiary, will cooperate with Blue Green Shuangcheng under a “co-construction” model, according to a filing to the Hong Kong stock exchange on Friday.

Blue Green is controlled by Cao Zhounan, the former CEO of Greentown China Holdings, which once ranked among the top 10 developers in mainland China.

Under the agreement, Blue Green will help Fantasia to formulate plans to reorganise its property projects on the mainland, facilitate communication with onshore creditors and implement strategies to accelerate the sale of properties and other assets.

The companies could also extend the agreement for services related to property projects, the statement said. The cooperation is for an initial period of 36 months, but could be extended.

Both parties will establish a special working group to discuss and promote cooperation intended under the agreement, the statement said.

Debt-laden Fantasia may face insolvency as creditors file wind-up petition

The move is the latest effort by Fantasia to deal with its onshore debt after creditors recently approved a payment-extension proposal on two onshore bonds due this year. Fantasia had also won approval from creditors holding over 75 per cent of involved offshore debt to restructure it in May.

The company’s overall debt, including senior notes and bonds and asset-backed securities, was about 62.1 billion yuan (US$8.5 billion) as of end-June, of which nearly 54 billion yuan is due within a year.

Founded in 1996 by Zeng Jie, also known as Zeng Baobao, the niece of China’s former vice-president Zeng Qinghong, Fantasia was among the earliest mainland Chinese developers to default on their offshore debt in October 2021 following Beijing’s “three red lines” move 14 months earlier to curb leverage in the sector.

China’s property market, one of the most important drivers of economic growth, has been hit by falling home sales and slumping prices, leading to debt defaults by dozens of developers, including Fantasia, CIFI Holdings and China Evergrande Group.

Meanwhile, a report from S&P Global Ratings on Monday said the slowdown in mainland China’s property sector is proving to be a drag on economic recovery, and could cause growth to fall below 3 per cent next year if the crisis worsens.

The ratings agency sees a 20 per cent chance of that happening as “the authorities will not provide significant stimulus”.

S&P anticipates property sales will drop by 10 to 15 per cent to between 11.5 trillion yuan and 12 trillion yuan this year compared with 2022, and by another 5 per cent in 2024 to between 11 trillion yuan and 11.5 trillion yuan.

Fantasia’s shares rose more than 9 per cent to HK$0.071 after slipping in early trading on Friday, erasing some of the 21 per cent loss so far this month. The shares resumed trading in August after a 16-month suspension.