Kaisa bond price to see volatility after Sunac deal collapses

May 28, 2015 19:05
Mainland property expert Ding Zuyu (inset) says Kaisa will have to find a new buyer for its shares after Sunac withdrew from the deal. Photos: Bloomberg, EJ Insight

Shenzhen-based Kaisa Group Holdings Ltd. will see more volatility in its bond price after Sunac China Holdings Ltd. abandoned its proposed acquisition of the troubled property developer, an industry expert said on Thursday.

“Investors originally thought that Sunac had entered [the company] and they were talking about final conditions,” said Ding Zuyu, co-president for E-House (China) Holdings Ltd., a mainland real estate service provider.

“But since Sunac has withdrawn [its offer], it is no longer about conditions, there are big risks in the bond’s value,” he said.

Sunac China announced in a regulatory filing on Thursday that it had abandoned its HK$4.55 billion bid for a 49 percent stake in Kaisa, the first Chinese property firm to default on its overseas bonds.

The company may have backed down from the deal because of political and financial concerns, but it could also be possible that Kaisa’s chairman Kwok Ying-shing had changed his mind, Ding said.

“He had hoped Sunac would become his white knight and complete the acquisition, but today he may have thought the price is not suitable or that things are now under control,” he said.

Kwok, 50, was reappointed as Kaisa chairman in April after resigning from the position in late December due to “health reasons”.

Tam Lai-ling, former vice-chairman and executive director of Kaisa, also returned as a senior adviser to help the company in debt restructuring, the Hong Kong Economic Journal reported Thursday.

“I personally think that besides Sunac China, many other enterprises are still interested in Kaisa," Ding said. "It mainly depends on the boss [of Kaisa].”

But he said it will be difficult for Kwok to manage the business without the share sale.

As part of the termination agreement, Sunac China said the sellers shall refund HK$1.1625 billion, half off the pre-payment, before May 29, and the remaining HK$1.1625 billion together with interest should be returned no later than Dec. 28.

Sun Hongbin, chairman of Sunac China, said in the regulatory filing that Kwok had provided personal guarantees to ensure the refund of the pre-payment and termination of the share sale.

Sunac China’s shares tumbled 5.72 percent to HK$9.2 on Thursday after the shares resumed trading following a suspension on May 15, while the Hang Seng Index dropped 2.23 percent. Shares of Kaisa remain suspended.

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EJ Insight reporter