Date
21 November 2017
Kaisa is struggling to make debt payments after Chinese officials and local courts blocked sales of properties in many of its projects. Photo: Reuters
Kaisa is struggling to make debt payments after Chinese officials and local courts blocked sales of properties in many of its projects. Photo: Reuters

Kaisa seeks concessions on US$2.5 bln offshore debt

Chinese property developer Kaisa Group Holdings Ltd. is seeking concessions from creditors on US$2.5 billion in offshore debt but stopped short of asking for a cut in the money owed.

The company is in the midst of a rescue by Sunac China Holdings Ltd., another Chinese property developer, after Chinese officials and local courts blocked sales of properties in many of its projects.

In a filing with the Hong Kong stock exchange Sunday, Kaisa said it will request an extension of bonds due between 2016 and 2020.

The company is also asking for a significant reduction in interest rates by more than half in some cases, the Wall Street Journal reported Monday.

An incentive of one-half of a percentage point will be offered to bondholders if enough of them sign up for the restructuring deal, the report said.

In addition to bondholders, whom Kaisa has not publicly named, its offshore creditors include lenders such as a unit of HSBC Holdings Plc. and foreign affiliates of China’s state-controlled Industrial and Commercial Bank of China Ltd., according to the filing.

“The company is facing acute liquidity pressure and severe business disruption and so it requires relief from its creditors,” the filing said.

It expects to run out of cash in the first half.

Last week, the company offered a proposal for mainland Chinese creditors that avoids a cut to the 48 billion yuan (US$7.7 billion) principal amount owed.

Onshore creditors face a reduction in the rates payable on amounts owed to them to at least 70 percent of the base rate set by the People’s Bank of China, which is currently 5.35 percent.

Kaisa also proposed to extend the tenors of onshore debt by between three and six years.

Sunac China Holdings Ltd. plans to acquire 49.25 percent of Kaisa for HK$4.55 billion (US$586.5 million) and buy the remaining publicly traded stock from investors.

The move could reduce the financial pressure on the developer but Kaisa said the plan hinges on its ability to restructure its debt.

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