Home / Companies / News /  Chinese property developer Kaisa proposes $400 million debt swap

Kaisa Group Holdings Ltd., which in 2015 became one of the first Chinese developers to default abroad, warned it risked reneging on its international debts again unless creditors agreed to a $400 million bond swap.

The Shenzhen-based company is one of the sector’s biggest offshore borrowers after China Evergrande Group, with about $10.9 billion of dollar bonds outstanding as of end-June.

Government efforts to control developers’ mounting debts, falling home sales and the crisis at Evergrande have shaken investor confidence. That has pushed down bond prices and effectively shut the market for new offshore debt issuance, making it even harder for property companies to raise the cash they need to repay coming debts.

“Persistent tightening governmental policy, multiple credit events and deteriorating consumer sentiment have resulted in temporary shut-down of various refinancing venues for the sector and put enormous pressure on our short-term liquidity," Kaisa said Thursday.

Kaisa is seeking to swap $400 million of notes due Dec. 7 for new bonds paying the same annual 6.5% coupon, which will mature in June 2023. Investors will get $25 in cash for every $1,000 in face value of notes they exchange.

If it can’t conclude the exchange, Kaisa warned it may not be able to repay the bonds at maturity on Dec. 7, and said it could consider an “alternative debt restructuring exercise."

The Hong Kong-listed developer said it was already in a 30-day grace period for more than $88 million of coupon payments due earlier this month, which it hadn’t paid on time. It didn’t specify whether there was any such grace period for repayment of principal on its maturing bonds.

In a separate filing late Wednesday, Kaisa said it had implemented a repayment plan for about 1.1 billion yuan, the equivalent of about $172 million, of wealth products “issued for and on behalf" of the company and its subsidiaries. Principal repayments will be staggered over the next 2 ½ years. It is still negotiating with holders of other wealth products, it added.

Kaisa’s shares, which had been halted since Nov. 5, resumed trading and jumped 18% by midafternoon Thursday in Hong Kong. A Kaisa bond due 2024 was bid at 33 cents on the dollar, according to Tradeweb.

A string of developers have defaulted on dollar debt in recent months, including China Properties Group Ltd., Fantasia Holdings Group Co., Modern Land (China) Co., and Sinic Holdings (Group) Co.

Some others such as Yango Group Co. and Xinyuan Real Estate Co. have persuaded investors to exchange bonds for longer-dated debts. Rating firms often view such swaps as distressed debt exchanges, which they see as a form of default. Distressed exchanges typically help a company avoid a formal default while switching investors into less financially attractive securities.

Kaisa’s credit ratings have already been slashed to levels that indicate a high risk of default. S&P Global Ratings lowered Kaisa’s credit rating to CCC- two weeks ago, saying the developer’s liquidity and refinancing ability were deteriorating severely. Fitch Ratings and Moody’s Investors Service have assigned Kaisa even lower ratings, of C and Ca, respectively.

Kaisa said earlier this month that it plans to speed up asset disposals to meet investor obligations, adding that it would try to sell assets in Shenzhen, Shanghai and other places.

This story has been published from a wire agency feed without modifications to the text


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