China property developer Fantasia faces key shareholder revolt on debt restructuring plan
- Fantasia said if its second-biggest shareholder TCL opposes the proposal, it could derail the debt restructuring plan, and shareholders may even get zero recovery
- Fantasia has already secured creditors’ support for its debt restructuring, and any disruption at this stage could undermine an already advanced process
A Chinese property developer whose default in 2021 has since fed into a broader industry rout is facing resistance to its restructuring plan from a major shareholder.
Fantasia Holdings second-biggest shareholder TCL Industries opposes the terms of the debt-to-equity swaps, a key part of the restructuring proposal that would dilute shareholders’ stakes, according to people familiar with the matter who asked not to be identified discussing private matters. TCL is seeking equitable treatment between minority investors and the controlling shareholder, one of the people said.
Hong Kong-listed Fantasia needs to hold a shareholder meeting to decide on the issuance of shares for the proposed debt swap, with support from at least 50 per cent of voting shareholders required. TCL, which has a 17.5 per cent shareholding, may vote against the issuance of new shares if current negotiations sour, said one of the people. It remains unclear when any shareholder meeting would take place.
Fantasia said in a response to Bloomberg that if TCL opposes the proposal, the restructuring efforts may fail, and in the worst-case scenario, shareholders would get zero recovery. TCL Industries did not respond to an email seeking comment.
Fantasia has already secured creditors’ support for its debt restructuring, meaning that any disruption at this stage could undermine an already advanced process. More broadly, the development highlights the clout that key shareholders may have as equity becomes a popular element in Chinese defaulters’ restructuring plans. Risks are already rising for weaker developers in the stock market, where financial strains are threatening the listing status for some.
After a 15-month wait, Fantasia revealed in January a restructuring blueprint that seeks to swap US$1.3 billion of offshore borrowings into shares and extend some debt. If implemented, the plan would result in offshore creditors collectively owning 52.6 per cent of the new Fantasia. TCL would be left with merely 1 per cent, and other minority shareholders with just 1.4 per cent.