Fantasia, the Chinese property company, has had the sale of four apartments blocked by authorities, the latest developer in Shenzhen to come under scrutiny after Kaisa defaulted last week.
The move by the Urban Planning Land and Resources Commission of Shenzhen Municipality sent bond prices to a record low along with its share performance.
Fantasia’s outstanding debt instruments maturing in 2020 and 2019 were trading at a cash price of 73.537 and 77.661 by Thursday noon, their record lowest levels as a result, according to Bloomberg data. This is down from their year-end levels of 84.41 and 85.64 respectively.
Meanwhile, the property company’s shares dropped as much as 16.3% to HK$0.79 ($$0.10) in Hong Kong, the biggest intraday decline since their listing in 2009.
Property market analysts are still mind-boggled as to why the sale of the property units in the southern city of Shenzhen in Guangdong were blocked, with some citing possible structural issues with the buildings while others commenting that it could be a case of corruption.
“The government has been putting a lot of effort on the anti-corruption exercise,” said a Hong Kong-based property analyst who declined to be named, adding that the freeze in the four apartment sales will not materially hurt Fantasia’s financial position.
President Xi Jinping said in a speech at a plenary session of the Communist Party’s top disciplinary agency earlier on Tuesday that there would be no let-up in his battle against corruption, which has already taken down thousands of senior officials including the country’s former security chief Zhou Yongkang.
Elsewhere, credit specialist firm Lucror Analytics said in a note that the company no longer had the property rights to the four locked units, citing Zheng Jingya, head of investor relations at Fantasia.
The company has verified that two units were locked for missing mortgage payments and are still investigating the reason behind the other two lockdowns, added Lucror in the note.
“We find the explanation for the locked units slightly confusing as it is not clear to us why the units, if sold, would continue to be on the website,” wrote Charles Macgregor, head of Asia for Lucror Analytics, in the note. “We will await the company's announcement.”
The fall in bond and share prices, as well as market uncertainty came before Fantasia issued a filing to the Hong Kong Stock Exchange Thursday evening, clarifying the issues raised.
The group confirmed that it had sold and transferred the property ownership rights of the four apartment units to independent third party purchasers in 2012 and 2013 respectively. Also, the developer had no interest in frozen units as at the date of announcement by the Shenzhen authorities and that it's business as usual.
Fantasia is the latest Chinese developer in Shenzhen to come under scrutiny after Kaisa, which also had several of its projects blocked and then missed a coupon payment of $500 million of its dollar-denominated bonds last week.
Kaisa’s woes were compounded by the recent resignations of key senior executives, including its chairman, vice-chairman and chief financial officer in December.
Last Friday, newly listed developer Logan Property said the authorities had since 2010 locked three of its apartment units, now worth some Rmb6 million ($967,000) at a residential project in Shenzhen.
While analysts attempt to unveil the reasons behind the Shenzhen government's move in blocking sales, the market is still being kept in the dark with regards to certain issues surrounding Kaisa.
“For Kaisa the issue is still unknown but for Logan, according to the company, it was related to the construction process of a property project and only a few units within the building block were involved,” said Franco Leung, credit analyst at Moody’s.
Fantasia, which develops commercial and residential properties in the Chengdu-Chongqing Economic Zone and the Pearl River Delta region, has $1.08 billion-equivalent of bonds outstanding, according to data compiled by Bloomberg.
For the year ended December 31, 2014, the company sold gross floor area of approximately 1.4 billion square metres, which was 6.76% more than that in 2013, according to a press release. Contracted sales rose by 0.39% to approximately Rmb10.2 billion, exceeding the annual sales target of Rmb10 billion.
