China’s Kaisa struggles for bailout from bondholders as default risks loom

A sign of Kaisa Plaza, a property developed by Kaisa Group Holdings, is seen near its apartment building in Beijing
A sign of Kaisa Plaza, a property developed by Kaisa Group Holdings, is seen near its apartment building in Beijing, China December 1, 2021. REUTERS / Tingshu Wang

December 2, 2021

By Scott Murdoch and Samuel Shen

HONG KONG (Reuters) – Chinese developer Kaisa Group Holdings Ltd is unlikely to win approval from bondholders to extend the maturity of a $400 million bond next week, analysts said. The analysis said, putting more pressure on other indebted companies. Kaisa’s proposal to delay the maturity of the 18-month bond comes amid growing concern among creditors about the ability of property developers to meet their foreign debt repayment obligations in the near term. China.

Several developers in late October urged regulators to extend the maturity of their offshore bonds -debt-maturity-extension-2021-10-27 or commit to debt restructuring, as more and more defaults occur in this sector.

Kaisa needs at least 95% of its bondholders to approve its proposal to exchange $400 million, 6.5% foreign bonds due on December 7 for new bonds due on June 6, 2018. 2023 with the same interest rate.

At least one group of Kaisa bondholders turned down the offer, according to a letter sent this week by their financial advisers to Kaisa’s board and a copy of the letter was obtained by Reuters. consider.

“The team believes the terms of the exchange offer are unacceptable and represents an unwillingness on the part of the company to consider more appropriate and comprehensive ways to address liquidity challenges.” Kaisa’s current short-term,” the letter read.

The group of bondholders mentioned in the letter to Kaisa offered the company a ‘no-pay period’ for the company to delay repayment in order to continue negotiations.

Bondholders, who say they own 50% of the debt Kaisa is trying to trade, have offered to finance the Chinese company $2 billion in new debt to help it avoid default. Two sources with knowledge of the debt told Reuters.

Exact details about the size of the sponsorship or the terms of the offer were not disclosed. Sources cannot be named due to security restrictions.

Sources say there has been very little interaction between Kaisa and the team since the offer was given to the Chinese developer.

Kaisa did not immediately respond to Reuters’ request for comment.

Analysts say the company’s struggle to win a much-needed relief from creditors will also weigh on other smaller developers looking to avoid restructuring processes and lawsuits The proceedings were lengthy and messy, analysts said.

James Wong, portfolio manager at GaoTeng Global Asset Management Ltd, said that for Kaisa, a debt restructuring is “quite certain”, as the threshold to approve the bond extension proposal is too high.

“Investors are waiting for that day (restructuring) to come,” he said, adding that smaller Chinese developers will continue to struggle.

Kaisa, which became the first Chinese property developer to default on its dollar bonds in 2015, said its banknote exchange offer will expire at 4 p.m. ET. Done on Thursday unless extending or terminating the proposal.

Kaisa is the second-largest issuer of US dollar bonds among China’s real estate developers after China Evergrande Group, once China’s best-selling developer and now at the center of the liquidity crisis. the country’s real estate sector.

A host of other Chinese developers are also staring at a wall of foreign debt maturing in the next few months, and some of them are scrambling to sell part of their assets to raise cash to avoid default.

Evergrande, which has more than $300 billion in debt, has defaulted on $82.5 million total coupon payments due on November 6, and investors are waiting to see if the developer can meet its obligations before the 30-day grace period ends on December 6.

Despite the unprecedented capital squeeze caused by the policy of suppressing accumulated debt in the sector, some developers are now able to mobilize new credit in the housing market.

The three developers plan to sell bonds in China to raise a total of $2.8 billion, suggesting Beijing is easing liquidity stress for the sector.

(Reporting by Scott Murdoch in Hong Kong and Samuel Shen in Shanghai; Writing by Sumeet Chatterjee, Editing by Shri Navaratnam) China’s Kaisa struggles for bailout from bondholders as default risks loom

Bobby Allyn

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