China: Kaisa fails to get bondholders nod to extend maturity, risks default

Chinese property developer Kaisa Group Holdings Ltd said on Friday it failed to secure the minimum 95% approval it needed from offshore bondholders to extend the maturity of a $400 million note due next week, raising the risk of a default. 

With the Chinese property sector gripped by an unprecedented liquidity squeeze, Kaisa now faces the possibility of defaulting on its 6.5% offshore bonds due Dec. 7 and drawing renewed focus on other developers also staring at a wall of offshore debt maturing over the next few months. 

Kaisa had hoped to exchange the $400 million 6.5% offshore bonds for new notes due June 6, 2023 at the same interest rate if at least 95% of holders accepted. It did not disclose how many bondholders had consented to the offer. 

Shares of the embattled property firm  dropped 9.8% to a record low of HK$0.92, taking the stock's plunge so far this year to around 75%. 

The firm, which became the first Chinese property developer to default on its dollar bonds in 2015, said it had been in talks with representatives of certain bondholders, but no "legally binding agreement" had been entered into yet. 

"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 said on Friday. 

It added that it still exploring selling assets and extending or renewing debt obligations, but cautioned there was no guarantee it would be able to meet the Dec. 7 maturity. 

A failure to repay or reach an agreement with creditors would have "a material adverse effect" on Kaisa's financial condition, it said. 

Kaisa is the second-largest dollar bond issuer among China's property developers after China Evergrande Group, which has more than $300 billion in liabilities, and like the others has been scrambling to raise capital to stave off a default. 

Reuters reported last month that the firm was looking to sell its Hong Kong-listed property management unit, Kaisa Prosperity Holdings Ltd. 

Last week, in its notes exchange offer, Kaisa said it could consider a debt restructuring exercise if bondholders did not approve the extension of maturity. 

Kaisa's failure in getting a much-needed lifeline from its creditors will also weigh on other smaller developers that are looking to avoid long and messy litigation and restructuring processes, analysts have said. 

Also on the horizon is the end of a 30-day grace period for Evergrande, which has been narrowly avoiding defaults, after it failed to pay coupons totalling $82.5 million due on Nov. 6.