China's Kaisa struggles for relief from bond holders as default risklooms Sign of the Kaisa Plaza, a real estate property developed by Kaisa Group Holdings, is seen near its apartment building in Beijing.
HONG KONG Reuters -- Chinese developer Kaisa Group Holdings Ltd is unlikely to win bondholders' approval to extend the maturity of a $400 million bond in the next week, causing more pressure on other indebted peers, analysts say. As a result of growing creditor concerns about Chinese property developers' ability to meet their near-term offshore repayment obligations, Kaisa proposed to delay the maturity of the bond by 18 months.
In late October, developers called for the regulators to extend their offshore bond maturities or undertake debt restructuring as a growing number of defaults hit the sector.
Kaisa's struggle in getting a much-needed lifeline from its creditors will weigh on other smaller developers that are looking to avoid long and messy litigation and restructuring processes, analysts said.
James Wong, portfolio manager at GaoTeng Global Asset Management Ltd, said that for Kaisa a debt restructuring is quite certain as the threshold for passing the bond maturity extension proposal is too high.
He said that investors are waiting for that day of restructuring to come, and that Chinese developers will continue to struggle.
Kaisa needs at least 95% of its bond holders to approve a proposal to exchange $400 million, 6.5% offshore bonds due December 7 for new notes due June 6, 2023 at the same interest rate.
The firm, which became the first Chinese property developer to default on its dollar bonds in 2015, said its notes exchange offer will expire on Thursday 4 pm London time unless it extends or terminates it's proposal.
Kaisa is the second largest U.S. bond issuer among China's property developers after China Evergrande Group, once China's top-selling developer and now at the centre of the country's property sector liquidity crisis. There have been signs of Kaisa's exchange offer being knocked back in recent days. A group of Kaisa bond holders had rejected the offer, according to a letter sent this week by their financial advisor to the Kaisa board and a copy of which was reviewed by Reuters.
The letter said that the exchange terms are unacceptable and show an unwillingness on the part of the company to consider more appropriate and holistic ways to address Kaisa's current short term liquidity challenges.
The group of bond holders mentioned in the letter sent to Kaisa offered a forbearance period'' to the company to delay the repayment to continue negotiations.
The bond holders, who own 50% of the debt that Kaisa is trying to exchange, offered $2 billion in fresh debt funding to the Chinese firm to help it avoid a default, two sources with knowledge of the offer told Reuters.
The exact details of the funding size or terms for the offer were not disclosed. The sources could not be named due to confidentiality constraints.
Since the offer was presented to the Chinese developer, there has been little interaction between Kaisa and the group, according to the sources.