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China Developer Kaisa Seeks Lengthy Bond Payment Extension

Debt-laden developer Kaisa plans an 18-month extension for its $400m dollar bond maturing on Dec 7, business intelligence group Redd said. Chengdu city moves to help developers’ liquidity.


The Kaisa Plaza of Kaisa Group Holdings
The Kaisa Plaza of Kaisa Group Holdings Ltd in Beijing, China. Photo: Reuters.

 

Cash-strapped Chinese property developer the Kaisa Group plans to propose an extension of one-and-a-half years for its $400 million dollar bond maturing on December 7, financial intelligence provider Redd has reported, citing two sources briefed on the matter.

REDD said the plan, which is expected to be released to bondholders as early as this week, might not carry any upfront cash or additional credit enhancement.

Kaisa declined to comment on the report.

Kaisa, which has the most offshore debt of any Chinese developer after China Evergrande Group, has missed coupon payments totalling over $59 million due on November 11 and 12, with 30-day grace periods for both.

Some offshore bondholders who did not receive coupon payments have tapped investment bank Moelis & Co to advise them on the matter, it was revealed on Tuesday.

The next dollar bond payment for Kaisa is the $400 million maturity on a 6.5% dollar bond due on December 7.
 


 

Chengdu Ensures Developers Funds

Meanwhile, in other property sector news, Chengdu, in China’s southwest, said it will move to ensure developers receive funds from pre-sold properties and fresh loans.

This is the first such move by a Chinese city to ease a liquidity crisis that has shaken confidence in the sector.

Real estate firms face a financial crunch due to regulatory curbs on borrowing, with China Evergrande Group at the centre of a crisis which has involved offshore debt defaults, credit rating downgrades and the dumping of shares and bonds.

The troubles have worsened in recent months, with prices falling in both new and resale homes in October amid deeper contractions in construction starts and investment by developers, weighing on China’s economic outlook.

A notice on the website of Chengdu’s local housing regulator on Tuesday said developers can withdraw 95% of presold funds held in escrow accounts when housing projects are completed.

It said local financial institutions had been told to increase property credit quotas and ramp up the disbursement of property loans, to safeguard developers and home buyers.

“That is the first city to clearly step up the quota of property loans,” Yan Yuejin, director of Shanghai-based E-house China Research and Development Institution, said.

All kinds of measures are expected to be introduced to accelerate issuance of property loans to prevent presold projects from being half-finished, Yan said, adding: “The slowdown in home sales in November will ease”.

Chinese authorities have yet to publicly give any signal that they will relax property regulations, but they have made financial tweaks to help home buyers and meet reasonable demand.

Some banks have accelerated disbursement of approved home loans in some cities and some have been told to issue more loans to property firms for project development, in efforts to marginally ease liquidity strains.

In Chengdu, some key developers are allowed to defer loan repayments or lower interest rate, the notice added.

 

 

• Reuters with additional editing by Jim Pollard

This report was updated with further information on November 24.

ALSO SEE:

Bondholders In China Developer Kaisa Seek Debt Recovery Help

Embattled Kaisa Group’s Shares Suspended in Hong Kong

China’s Kaisa May Sell Property Management Unit, HK Sites

Jim Pollard

Jim Pollard is an Australian journalist based in Thailand since 1999. He worked for News Ltd papers in Sydney, Perth, London and Melbourne before travelling through SE Asia in the late 90s. He was a senior editor at The Nation for 17+ years and has a family in Bangkok.

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