[Epoch Times October 06, 2021](Interviews and reports by Epoch Times reporters Luo Ya and Lin Cenxin) China’s large real estate developers continue to default on debt. It was previously reported that Evergrande Group was planning to sell the properties of its subsidiary Evergrande, and the “receiver” who finally surfaced was the most low-key Hopson Development among the five major real estate developers in Guangdong. On the same day, another real estate company in Shenzhen, Guangdong, “Fantasia” reported a default on US dollar debt.
On October 4, Hong Kong stocks China Evergrande and Evergrande Property were suspended from trading in Hong Kong. Hong Kong media reported that the main reason for the suspension was that “Hoson Development” planned to acquire about 51% of the equity of Evergrande Property.
If calculated on the basis of the current valuation of 40 billion Hong Kong dollars for Evergrande Property, the trading price of 51% of the shares is about 20.4 billion. After the news was disclosed, Hopson Chuangzhan responded, “Everything is subject to the announcement.”
Industry insider Ms. Wang, who is familiar with the developments of mainland real estate companies, told The Epoch Times on October 5 that Evergrande Property is a good property under Evergrande, “Zhu Mengyi, the owner of Hopson Development, cannot talk about saving Evergrande. He must have taken a deal. I think some of Evergrande’s assets are still good. I want to negotiate a lower price during this period and collect the good assets.”
Hopson Development was established in 1992 and listed on the Hong Kong Stock Exchange in 1998. Country Garden, Evergrande, R&F, and Agile are listed as the top five real estate developers in Guangdong Province, and are known as the “Five Tigers in South China” to develop mid-to-high-end large-scale housing Mainly real estate properties.
Ms. Wang said that according to industry observations, Zhu Mengyi himself is a more realistic person. Taking commercial interests as the main consideration, it is estimated that the acquisition has little to do with political tasks.
“Selling the property subsidiary will not save Evergrande”
Ms. Wang said that Evergrande had liquidity problems. Last year, it had already negotiated with various real estate companies to sell its assets. The negotiating objects flowing out of the market include Country Garden Service, Vanke, China Resources Vientiane, etc. At the end of last year and the beginning of this year, negotiations have already been held.
“It’s just that the time is better now, because Evergrande is now under a lot of pressure, from the central government and from all over the world, so take this opportunity to see if it can sell it at a lower price.” Ms. Wang said.
According to comprehensive real estate analysts, if this transaction is established, it can be used to repay foreign debts under normal circumstances. Evergrande currently has at least two US dollar debts that have not paid interest as scheduled. However, there is news that the local government has locked in Evergrande’s advance collection, and it is uncertain whether the central government will require Evergrande to turn in the cash-out funds and use it as a priority to pay off the arrears of mainland projects.
The Wall Street Journal reported on October 5 that this potential transaction may temporarily provide Evergrande with a respite, but it is still extremely uncertain how much leeway it will ultimately bring to investors. According to the report, Evergrande cannot be saved by selling its property service subsidiary.
Ms. Wang said that according to industry news, Evergrande is still negotiating for the sale of its subsidiaries, including Evergrande High-Tech Group, Evergrande Internet Group, and Evergrande Modern Agriculture Group. Evergrande Motors also reported that it was in directional negotiation.
Ms. Wang predicts that the next situation is that Evergrande’s good assets and good companies will be acquired by state-owned assets, and Evergrande, as a private enterprise, has the third and fourth generations of capital behind the group, and Xu Jiayin is the white glove of the powerful. , And then can only be at the mercy of others.
Domino effect?Another 10 billion-level real estate company also breached the contract
At the same time, in China’s real estate market, another tens of billions of real estate companies announced a debt default. On the evening of October 4, Fantasia Holdings issued an announcement stating that the company had US$206 million in bills due, but Fantasia failed to pay on time. According to the announcement, Fantasia will have at least $1.6 billion in foreign debt due within this year.
Fantasia was founded by Zeng Baobao in 1996. It mainly develops real estate projects in Shenzhen and Chengdu, and is headquartered in Shenzhen, Guangdong. Zeng Baobao is the niece of Zeng Qinghong, the former vice president of the Chinese Communist Party.
Ms. Wang said that, generally speaking, the key to a tens of billions of private enterprises like Fantasia depends on whether the government can save them. However, the government will only save the top enterprises, and it is impossible to save those outside the 20th place.
A whistleblower told Free Asia that last Wednesday (September 29), Fantasia sold its only profitable high-quality asset and the listed company Colour Life Property to Country Garden in exchange for no more than 3.3 billion yuan in cash.
The source said that employees’ salaries are still being paid normally, but since June, there have been problems with employees’ reimbursement and various funds. Especially before the 20th National Congress of the Communist Party of China, the Fantastic Year as a red powerful family business may encounter even greater troubles.
Currently, Fantasia has suspended trading in Hong Kong stocks. As of September 28, the stock price was reported at HK$0.56. Since the beginning of this year, the stock price has shrunk by 55.5%, and its market value has fallen to HK$3.23 billion.
Fitch Ratings downgraded Fantasia’s rating from B to CCC- on Monday (October 4), saying that the company’s cash flow position “may be more tight than previously expected.”
Ms. Wang said that judging from the 2 degree downgrade of ratings on September 18, Fantasia, the company has had troubles in the past, and it cannot be regarded as part of Evergrande’s domino effect, but a microcosm of the authorities’ policy of suppressing the housing market in recent years. .
“In the past two years, it has been difficult to do real estate. Especially after the fuse of Evergrande, various real estate companies have become cautious in obtaining land.” Ms. Wang estimated that Sunac is likely to be the next one among the leading companies. Evergrande and Sunac have a large market, and cash flow is also a problem.
Editor in charge: Li Qiong#
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