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Kaisa In Last-Ditch Talks With Bondholders As Default Looms

Property developer sought to exchange its 6.5% offshore bonds due December 7 for new notes due June 6, 2023, at the same interest rate


Kaisa
A screen advertising Chinese property developer Kaisa Group is seen at the lobby of its Beijing office building. Photo: AFP

 

Chinese property developer Kaisa Group Holdings has begun talks with some of its offshore bondholders over extending the deadline for a $400 million debt repayment due next week, two sources with direct knowledge of the matter said.

Shares in the group slipped sharply on Friday after it said it had failed to secure the minimum 95% approval needed from offshore bondholders to carry out an exchange offer of its 6.5% offshore bonds due December 7, without which it could risk default.

A group of bondholders known as New Money Consortium, which holds more than half of the Kaisa notes, has rejected the exchange offer, according to media reports, and offered to inject $2 billion in new funds if its alternative plan was approved.

Fitch Ratings said the New Money Consortium plan would have been credit positive had it been accepted. According to the rating agency, Kaisa’s current bond prices “seem to suggest that the market is already pricing in a default.”

 

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Shares of the embattled property firm closed down 8.82%, far outpacing the 0.09% decline in Hong Kong’s Hang Seng Index, taking the stock’s plunge so far this year to around 75%.

The company had hoped to exchange the $400 million 6.5% offshore bonds for new notes due June 6, 2023 at the same interest rate if at least 95% of holders accepted. It did not disclose how many bondholders had consented to the offer.

Kaisa, which became the first Chinese property developer to default on its dollar bonds in 2015, said it had been in talks with representatives of certain bondholders, but that no “legally binding agreement” had yet been entered into.

“To ease the current liquidity issue and reach an optimal solution for all stakeholders, the company is assessing and is closely monitoring the financial condition and cash position of the group,” it said on Friday.

It added that it still exploring selling assets and extending or renewing debt obligations, but cautioned there was no guarantee it would be able to meet the December 7 maturity.

A failure to repay or reach an agreement with creditors would have “a material adverse effect” on Kaisa’s financial condition, it said.

Kaisa is the second-largest dollar bond issuer among China’s property developers after China Evergrande Group, which has more than $300 billion in liabilities, and like the others has been scrambling to raise capital to stave off a default.

 

  • Reuters with additional editing by George Russell

 

SEE MORE:

Kaisa Group Default Risk Grows After Latest Setbacks

Kaisa Offshore Investors Reject Bond Extension

Kaisa Group Offloads Airport Site For $1bn: Mingtiandi

 

George Russell

George Russell is a freelance writer and editor based in Hong Kong who has lived in Asia since 1996. His work has been published in the Financial Times, The Wall Street Journal, Bloomberg, New York Post, Variety, Forbes and the South China Morning Post.

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