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Fantasia was downgraded by S&P to CCC from B by S&P and placed on credit watch negative due to its substantial repayment risk on USD bonds including its $212mn on its 7.375% bonds due October 4 and its $250mn 6.95% 2021s and $300mn 15% 2021s due in December. S&P notes that Fantasia has not made material progress with the developer failing to communicate a concrete repayment plan.

S&P says that Fantasia originally planned to use its offshore cash of RMB 1.5bn ($230mn) as of June 30, 2021 from its unrestricted cash balance of RMB27.1bn ($4.2bn) to repay its October dollar bond. But due to tight liquidity, the “offshore cash balance may have been put to other use”. Fantasia also planned to source equity capital for its Beijing and Qingdao projects, part of which would help fund their dollar bonds maturing in December. “However, we have not seen substantial progress on raising cash from these so far”, S&P said. Similar to the Fitch’s downgrade to B mid-month, S&P notes that Fantasia’s cash could be substantially trapped at the project levels, given its involvement in JVs. Fantasia had ~RMB 10bn ($1.6bn) of cash at the holding company end-June, which was readily accessible according to the management. But using this money for debt repayment would hurt operations and liquidity they added. On Monday, September 27, Moody’s also downgraded Fantasia to B3.

Fantasia’s shares and property management unit Colour Life Services Group were put on a trading halt on Wednesday, with regard to a proposed “very substantial disposal”. Country Garden Services Holdings disclosed in a filing on Tuesday that it agreed to buy 100% of Colour Life and its core assets for a combined RMB 3.3bn ($511m) in three instalments. S&P noted that the above sale would only provide partial relief and there is an execution barrier to using the cash proceeds to pay-off Fantasia’s debt.

Fantasia’s bonds due December this year rallied sharply following news of its property unit sale with its 15% bonds due December 2021 jumping 12.5% to 68.8.

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