Chinese developer Fantasia plans US$4 billion restructuring with debt-to-equity swap, new dollar bonds to cure defaults

Plan includes US$1.3 billion debt-to-equity swap and new longer-term, lower-coupon offshore bonds, according to a stock-exchange filing

The Shenzhen-based company says it has approval from creditors holding 24.5 per cent of the aggregate principal amount of the outstanding bonds

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Men stand outside the headquarters of Chinese developer Fantasia Holdings in Shenzhen, Guangdong province, China on November 10, 2021. Photo: Reuters

Published: 4:59pm, 16 Jan 2023

Debt-laden Chinese property developer Fantasia Holdings proposed a restructuring that would give it two to six-and-a-half years of breathing room thanks to a debt-to-equity swap and the conversion to longer-term, lower-coupon bonds.

The offer includes swapping US$1.3 billion out of the company’s total of US$4.018 billion in offshore bonds into Fantasia shares, according to a filing with the Hong Kong stock exchange late on Sunday.

The balance of the debt would be converted into eight new tranches of notes maturing between 2024 and 2029. The new notes will earn payment-in-kind in initial years before cash interest kicks in at 5 to 8 per cent annually. The annual coupon on the company’s existing defaulted bonds ranges from 6.95 to 15 per cent.

The Shenzhen-based company, among the earliest Chinese developer to renege on its offshore debts, said it has received approval from creditors holding 24.5 per cent of the aggregate principal amount of the bonds.

Residential buildings in Zhengzhou, Henan province, China, on January 6, 2023. Photo: Bloomberg

“The debt-to-equity swap is good to help improve the company’s capital structure, which can ultimately pave the way for these distressed developers to survive the crisis,” said Lawrence Lu, S&P Global Ratings’ senior director.

Founded in 1996 by Zeng Jie, the niece of former vice-president Zeng Qinghong, Fantasia surprised the market in October 2021 when it said it would not be able to repay US$205.7 million in remaining principal it owed on a US$500 million senior note it issued, only days after it told investors and creditors that it had made a funding arrangement to repay the bond on maturity.