Kaisa edges nearer to default after failing to increase maturity

Chinese developer’s rising danger of default comes as property sector is gripped by an unprecedented liquidity squeeze.

Chinese property developer Kaisa Group Holdings Ltd has stated it did not safe the minimal 95 % approval it wanted from offshore bondholders to increase the maturity of a $400m be aware due subsequent week, elevating the danger of default.

With the Chinese property sector gripped by an unprecedented liquidity squeeze, Kaisa now faces the potential for defaulting on its 6.5 % offshore bonds due on December 7 and drawing renewed concentrate on different builders additionally gazing a wall of offshore debt maturing over the subsequent few months.

“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 stated on Friday.

Kaisa had hoped to alternate the $400m 6.5 % offshore bonds for brand spanking new notes due June 6, 2023 on the identical rate of interest if at the very least 95 % of holders accepted. It didn’t disclose what number of bondholders had consented to the provide.

Shares of the embattled property agency dropped 9.eight % to a document low of $0.92 Hong Kong {dollars} ($0.12), taking the inventory’s plunge to date this 12 months to approximately 75 %.

The agency, which grew to become the primary Chinese property developer to default on its greenback bonds in 2015, stated it had been in talks with representatives of sure bondholders, however no “legally binding agreement” had been entered into but.

It added that it nonetheless exploring promoting property and increasing or renewing debt obligations, however cautioned there was no assure it will be capable to meet the December 7 maturity.

A failure to repay or reach an settlement with collectors would have “a material adverse effect” on Kaisa’s monetary situation, it stated.

Kaisa is the second-largest greenback bond issuer amongst China’s property builders after China Evergrande Group, which has greater than $300bn in liabilities, and just like the others has been scrambling to boost capital to stave off a default.

The Reuters information company reported final month that the agency was seeking to promote its Hong Kong-listed property administration unit, Kaisa Prosperity Holdings Ltd.

Last week, in its notes alternate provide, Kaisa stated it may contemplate a debt restructuring train if bondholders didn’t approve the extension of maturity.

Kaisa’s failure in getting a much-needed lifeline from its collectors can even weigh on different smaller builders that want to keep away from lengthy and messy litigation and restructuring processes, analysts have stated.

Also on the horizon is the top of a 30-day grace interval for Evergrande, which has been narrowly avoiding defaults, after it did not pay coupons totalling $82.5m due on November 6.