Investors have been caught off guard by defaults by Fantasia and acute credit stress at Sinic, even though both property developers appeared to report strong cash coverage relative to their short-term debt. Restricted cash and cash from subsidiaries can inflate a property developer’s cash position, distorting its real capacity to mobilize cash and repay debt. To more precisely monitor developers’ cash positions, we would recommend excluding restricted cash and discounting the cash provided by subsidiaries.
