Kaisa, unit transactions suspended as China’s real estate debt crisis routs developers’ actions

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  • Kaisa says she faces unprecedented liquidity pressure
  • Document shows Shenzhen plans to divest assets to repay WMPs
  • Real estate stocks fall, China high yield bond spreads hit record high
  • Yango Group obtains extension of its onshore bonds, sources say

HONG KONG / SHANGHAI, Nov. 5 (Reuters) – Kaisa Group Holdings Ltd (1638.HK) and three of its units had their shares suspended on Friday, a day after a subsidiary missed a payment to onshore investors due to the Chinese real estate debt snowballing the crisis shakes other developers.

Shenzhen-based home builder Kaisa, which guaranteed the wealth management product, said in a statement on Thursday that it was facing unprecedented liquidity pressure due to a difficult real estate market and degradation. marks.

Kaisa and its unit Kaisa Prosperity (2168.HK) said in separate exchange documents on Friday that trading in their shares was suspended pending the release of “inside information.” The companies did not specify.

Reuters reported last month, citing sources, that Kaisa was seeking buyers for her Kaisa Prosperity property management unit and two residential sites in Hong Kong, as she struggles to cope with a wall of debt repayments. Read more

Kaisa’s troubles come amid concerns over the worsening liquidity crunch in China’s real estate sector, with a spate of overseas defaults, downgrades in credit ratings and massive sell-offs of shares and of promoters’ obligations in recent weeks.

Kaisa has the most offshore debt maturing in the next year of any Chinese developer after China Evergrande Group (3333.HK), which is running under more than $ 300 billion in liabilities.

A financial unit at Kaisa had missed a payment on a wealth management product (WMP), the developer said on Thursday, adding that it was raising funds to ease the pressure by taking action, including speeding up asset sales. . Read more

Kaisa plans to sell 18 of its assets in Shenzhen City, mostly retail and commercial properties, with a total value of 81.8 billion yuan ($ 12.78 billion) by the end of 2022, according to a document seen by Reuters on Friday.

The proceeds will be used to reimburse wealth management products. The developer also has 95 urban renewal projects in Shenzhen, valued at 614 billion yuan, which can help replenish its capital after sale on completion or early divestiture.

Media Cailianshe, citing unidentified sources familiar with the matter, reported that state-owned companies including China Resources Land (1109.HK) were in talks to buy some of Kaisa’s urban renewal projects in the southern city.

China Resources did not immediately respond to Reuters’ request for comment. Kaisa also did not comment.

EXTENSION OF LOSSES

Kaisa has around $ 3.2 billion in offshore senior bonds maturing over the next 12 months, with the next $ 400 million due falling on December 7. She has coupon payments totaling over $ 59 million due on November 11 and 12.

On Friday, a sub-index plotting the continental real estate sector (.HSMPI) fell 2.8%, worsening its losses over the past two weeks to 17.8%. A real estate stock index A (.CSI000952) also fell 2.1%.

Shares of Evergrande, once China’s largest real estate developer and whose debt problems sparked a liquidity crunch in China’s $ 5,000 billion real estate sector, fell 2.5% to their highest low level since September 21.

The company’s October 2022 11.5% bond issued by its Scenery Journey unit fell more than 10% on Friday morning to exceed 300%, according to Duration Finance, pushing developer bonds down sharply.

Evergrande narrowly avoided a default for the second time last week, but faces another strict deadline on November 10 for more than $ 148 million in coupon payments that were due on October 11.

Scenery Journey has coupon payments totaling over $ 82 million due on November 6, although the terms of the bonds allow a 30-day grace period on those payments.

An ETF listing Asian dollar high yield bonds (AHYG.SI) fell 1.6%, while spreads on Chinese high yield dollar debt (.MERACYC) came close to record highs.

Developers have been scrambling to ease short-term liquidity cuts as they face looming debt repayments and tighter funding terms.

The Yango Group, which earlier this week reached an agreement with investors to delay payment of principal on the asset-backed securities, has agreed with investors to extend the payment of its onshore bond of 636 by one year, 5 million yuan due on November 19, according to two sources familiar with the matter. told Reuters on Friday. Read more

“Kaisa could possibly be another Evergrande,” said Raymond Cheng, China research manager at CGS-CIMB Securities, adding that the corporate struggles had heightened market concerns about developer liquidity conditions.

“Even though regulators have easing measures… it looks like it can’t help much,” he said. “Unless the government takes aggressive easing measures … we expect more developers to have trouble (paying off) their debts.”

Shenzhen local authorities said in a statement on Friday that they would strictly enforce real estate market regulatory policies and guard against speculation.

($ 1 = 6,4005 Chinese yuan)

Reporting by Clare Jim, Donny Kwok and Anne Marie Roantree in Hong Kong, Andrew Galbraith and Steven Bian in Shanghai, and Cheng Leng and Shuyan Wang in Beijing; Written by Sumeet Chatterjee; Editing by Jacqueline Wong, Shri Navaratnam and Mark Potter

Our standards: Thomson Reuters Trust Principles.


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