China’s Kaisa Group Holdings said on Friday it had failed to secure the minimum 95% approval needed from its offshore bondholders to extend the maturity of a $400 million note that is due next week, raising the risk of a default.
The embattled property developer last week announced its offer to exchange its 6.5% offshore bonds due December 7 for new notes due June 6, 2023, at the same interest rate if holders approved.
In a Hong Kong stock exchange filing, Kaisa did not disclose how many bondholders had consented to the offer, but said as the minimum acceptance had not been met, “the exchange offer and consent solicitation will not proceed and shall lapse automatically”.
A group of bondholders known as New Money Consortium, which holds more than half of the Kaisa notes, has rejected the exchange offer, according to media reports, and offered to inject $2 billion in new funds if its alternative plan was approved.
Fitch Ratings said the New Money Consortium plan would have been credit positive had it been accepted. According to the rating agency, Kaisa’s current bond prices “seem to suggest that the market is already pricing in a default”.
String of Defaults
The failure makes Kaisa defaulting on its debt obligation next week a high possibility, which would be its second and would add to the string of defaults in the Chinese property sector currently in the grip of an unprecedented liquidity squeeze.
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.
However, there was no guarantee Kaisa would be able to meet the repayment obligations at maturity on December 7, it said, adding its failure to repay or reach an agreement with creditors would have “a material adverse effect” on its financial condition.
Kaisa, like many other Chinese developers facing a liquidity squeeze, has been scrambling to raise capital by divesting assets including Hong Kong-listed property management unit, Kaisa Prosperity Holdings.
- Reuters with additional editing by George Russell
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