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.
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 and 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
Debt-laden Fantasia may face insolvency as creditors file wind-up petition
The company’s overall debt, including senior notes and bonds and asset-backed securities, amounted to 62.1 billion yuan (US$8.5 billion) on June 30, of which nearly 54 billion yuan was 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 in August 2020 to curb excessive leverage in the sector.
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Boom, bust and borrow: Has China’s housing market tanked?
Boom, bust and borrow: Has China’s housing market tanked?
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 and Country Garden Holdings.
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 rating company 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 this year to between 11.5 trillion yuan and 12 trillion yuan, and by another 5 per cent in 2024 to between 11 trillion yuan and 11.5 trillion yuan.
Fantasia’s shares closed nearly 8 per cent higher at HK$0.070 on Friday after slipping in early trading, erasing some of the 21 per cent loss so far this month. The shares resumed trading in August after a 16-month suspension.