Chinese developer Kaisa’s unit misses payment, debt concerns rise

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A construction site for Chinese real estate developer Kaisa Group is seen in a downtown area of ​​Shanghai on February 17, 2015. REUTERS / Carlos Barria

SHENZHEN, China / HONG KONG, Nov. 4 (Reuters) – Chinese property developer Kaisa Group Holdings Ltd (1638.HK) said on Thursday that its financial unit missed a payment on a wealth management product (WMP), adding to worries about a cash crunch the debt-strapped business.

Kaisa’s troubles come amid concerns over the worsening liquidity crunch in China’s real estate sector, with a spate of overseas defaults, downgrades in credit ratings and massive sell-offs of shares and of promoters’ obligations in recent weeks.

The Shenzhen-based developer, which provides collateral for the wealth management product, said in a statement that it was facing unprecedented liquidity pressure due to a difficult real estate market and downgrading ratings.

He said he was raising funds to ease the pressure through measures, including accelerating asset sales. It is ranked as the 25th largest developer in the country by home sales.

Kaisa has the most offshore debt to mature in the next year of any Chinese developer after China Evergrande Group (3333.HK), which is running under more than $ 300 billion in liabilities.

The deterioration in the health of China’s $ 5,000 billion real estate sector, a major engine of economic growth, is testing Beijing’s resolve to pursue painful structural reforms such as reducing high debt levels in the sector. Read more

Shenzhen regulators will hold a meeting on Friday to discuss liquidity issues at Kaisa and her counterpart Fantasia, local media outlet Cailianshe reported. Fantasia defaulted on a tranche of offshore bonds last month.

Fantasia and Kaisa declined to comment. The Shenzhen Central Branch of the People’s Bank of China (PBOC) could not be reached for comment.

Kaisa’s senior management, including group chairman Kwok Ying Ching, spoke to WMP investors in a meeting Thursday, according to the developer’s statement, to discuss payment solutions.

Two investors told Reuters that Kaisa told the meeting that he had a total outstanding of 12.79 billion yuan ($ 2.00 billion) in principal and interest, and that he planned to repay it gradually. . But investors pulled back sharply, they added.

Kaisa did not immediately respond to questions from Reuters about his repayment plan.

PROGRESSIVE REIMBURSEMENT

Kaisa, like other heavily indebted Chinese real estate developers and conglomerates, issues high yield WMPs to most family investors – a popular way to borrow that circumvents strict government lending restrictions.

Evergrande’s wealth arm, which has raised more than 100 billion yuan in the past five years, missed its payments earlier this year, prompting protests from investors in several cities in September who feared they would fail. never get their money back. Read more

Kaisa’s Hong Kong-listed shares, which have a market value of around $ 1 billion, plunged more than 15% on Thursday to an all-time low. Its December 2021 6.5% dollar bond fell more than 17% to 51.5 cents, yielding more than 1,000%, according to Marketaxxess.

Kaisa has around $ 3.2 billion in offshore senior bonds due over the next 12 months, with the next $ 400 million due falling on December 7. She has coupon payments totaling over $ 59 million due on November 11 and 12.

Kaisa Finance’s headquarters were nearly empty Thursday morning, with several police vehicles parked outside the building.

Reuters reported last week that Kaisa was seeking buyers for its Hong Kong-listed property management unit Kaisa Prosperity Holdings Ltd (2168.HK) and two residential sites in the city. Read more

Evergrande narrowly avoided a default for the second time last week, but faces another strict deadline on November 10 for more than $ 148 million in coupon payments that were due on October 11.

Its Scenery Journey unit has coupon payments totaling over $ 82 million due on November 6, although the terms of the bonds allow a 30-day grace period on those payments.

LIQUIDITY CRISIS

Separately, small player Yango Group (000671.SZ), which seeks to swap its bonds for dollars to avoid default, said it has reached an agreement with investors in China to extend principal payments on the back-to-back securities. to assets.

Shanghai Shimao Co (600823.SS) announced that it will limit investor participation in seven Shanghai-traded bonds from Friday. He added that he did not see any major events seriously affecting his repayment capacity.

Investor concerns about the widening impact of the liquidity crunch sparked massive bond sales from other Chinese developers on Thursday in onshore markets.

Exchange-traded bonds of the onshore units of developers Yuzhou Group (1628.HK) and Shimao Group (0813.HK) plunged more than 20%, causing trading to stop. Refinitiv data showed dollar bonds of Ronshine China Holdings (3301.HK), Zhenro Properties Group (6158.HK) and Guangzhou R&F fell more than 10%.

($ 1 = 6.3980 yuan Chinese renminbi)

Reporting by David Kirton in Shenzhen, Clare Jim in Hong Kong, Andrew Galbraith in Shanghai, Cheng Leng and Shuyan Wang in Beijing; Editing by Sumeet Chatterjee, Kim Coghill & Shri Navaratnam

Our standards: Thomson Reuters Trust Principles.


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