Fantasia Holdings, a Shenzhen-based developer, missed repaying $206 million worth of bonds that matured Monday, the company said in a stock exchange filing. It is now assessing "the potential impact on the financial condition and cash position of the group," it added.
Separately, the property management unit of Country Garden, China's second-largest developer by sales after Evergrande, said in a filing that Fantasia had failed to repay a company loan of about 700 million yuan ($109 million). Fantasia had informed the company that it would probably "default on [its] external debts," Country Garden Services added.
"The [Chinese] property sector is worrisome," wrote Larry Hu and Xinyu Ji, China economists for Macquarie Group, in a research note on Tuesday.
Fantasia's missed payments show that Evergrande's troubles "could dampen the sentiment for homebuyers, developers, and banks, causing more developers to run into a liquidity crunch," they said.
The outlook for the Chinese property market is not encouraging. Property sales in the top 30 Chinese cities plunged 31% in September from a year ago, according to Macquarie's estimates.
Evergrande's debt crisis has unsettled global investors in recent weeks, raising concerns about a potential domino effect on the broader Chinese economy and financial markets. The company's problems have been brewing for more than a year, after Beijing started reining in the real estate sector in August 2020 to curb excessive borrowing to prevent the market from overheating.
Earlier this year, the Chinese government made it clear that it would prioritize "common prosperity" in its policy goals and tame runaway home prices, which it has blamed for worsening income inequality and threatening economic and social stability.
Evergrande's liquidity crisis has escalated in recent months. The company warned investors of its cash flow crisis in September, saying that it could default if it was unable to raise money quickly. In the past few weeks, it missed at least two bond interest payments.
"While Evergrande's problems are unlikely to trigger a Lehman moment, they will aggravate the ongoing property sector slowdown," said Louis Kuijs, head of Asia economics at Oxford Economics, in a report on Tuesday.
"Given the large overall footprint of the residential real estate sector via 'backward linkages' to sectors such as steel, its slowdown will weigh significantly on overall economic growth," he said. Nevertheless, Chinese policymakers appear to be standing firm. Last week, the People's Bank of China and the banking regulator said that they would protect homebuyers. Their statement made no mention of developers.
