Kaisa is Trying to Avoid the Worst-Case Scenario

For a long time, China Evergrande Group and its problems dominated the headlines. However, China Evergrande Group is not alone, as another real estate developer Kaisa is also struggling to cope with issues. The company announced on Thursday plans for paying back investors, temporarily alleviating concerns about default as the country’s property sector continues to face pressure. 

As a reminder, Wednesday was the first day of trading after a nearly three-week halt. Kaisa suspended trading after missing a payment on a wealth management product earlier this month. Besides, its other units Kaisa Capital, Kaisa Health as well as Kaisa Prosper also suspended trading in November. 

In October, Fitch Ratings and S&P Global Ratings downgraded Kaisa. Notably, both of them cited the company’s diminishing cash flow. 

Kaisa and its plans

The company said on Thursday it wants to extend the maturity of $400 million by a year and a half. Unsurprisingly, Kaisa wants to avoid a messy default and resolve a liquidity crisis. In a filing, the company said it would exchange its 6.5% offshore bonds due Dec 7 for new notes due June 6, 2023, at the same interest rate if at least 95% of holders accept.

Unfortunately, it missed coupon payments totalling $88.4 million due on November 11 and 12. It has the most offshore debt among Chinese developers after the China Evergrande Group. The company said a sharp downturn in the financing environment limited its funding sources to meet upcoming maturities. 

Developers in China are facing an unprecedented liquidity squeeze due to regulations. The developer is trying to raise capital by divesting assets including the Hong Kong-listed property management unit, Kaisa Prosperity Holdings Ltd.

The real estate developer sold a parcel of land in Hong Kong to a local investor for HK$3.78 billion ($484.82 million). The company used more than half of  HK$3.78 to repay the loans it borrowed for the land. The real estate giant is also selling another land plot in Hong Kong. 

The company, in a separate filing on Wednesday, said it aims to accelerate the disposal of real estate projects as well as other high-quality assets to improve liquidity. 

Other developers including China Evergrande Group are also negotiating with their creditors and scrambling to raise funds. For instance, China Evergrande Group’s electric vehicle subsidiary’s onshore unit raised its registered capital by 39% to $3.5 billion. 

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