Foreign bondholders of Chinese property developer Kaisa have turned down the ailing conglomerate’s offer to extend the maturity of their debt and avoid a messy default next week. according to a letter to the company’s president reported by the Financial Times.
This move could deepen a Crisis in Kaisa, one of China’s most indebted developers, has made a sale of its assets to meet debts including about $3 billion in bonds due over the next 12 months.
A group that claims to represent more than 50% of investors in some of their most pressing debt — a $400 million bond that matures on December 7 — wrote Kaisa on Tuesday. to say that a proposal it made late last month to swap bonds was “unacceptable,” according to the letter.
The offer proposed by Kaisa on November 25th would swap the bonds for new bonds maturing in June 2023 but require 95% approval of bondholders.
Kaisa warned in a stock exchange filing that if the offer fails, it could default on the bond and could consider debt restructuring.
The bondholders group also proposed a period of prohibition – i.e. a temporary postponement of loan payments – to “breathe” Kaisa and assuage market concerns about the impact of a possible default.
The group of bondholders includes major investors such as Pimco and Ashmore, according to a person familiar with the matter.
Ashmore declined to comment. Pimco did not respond to a request for comment.
Kaisa is the latest Chinese property developer to find itself caught up in an industry-wide liquidity crisis that has engulfed its peers. Evergrande. They rushed to raise cash from property sales in Shenzhen, mainland China’s most expensive residential property market, and Hong Kong in November after they missed payments for management products. assets they secure, raising concerns about their ability to meet their financial obligations.
Kaisa’s dollar bonds maturing on December 7 are trading at about 45 cents against the dollar, halving since mid-September, when the company’s debt still trades near par. Its Hong Kong-listed shares have fallen by nearly three-quarters this year.
“The team believes the terms of the exchange offer are unacceptable and represents an unwillingness on the part of the company to consider more comprehensive and appropriate ways to address liquidity challenges.” Kaisa’s current short-term,” said the letter from the group of investors.
The group, which has hired financial consulting firm Lazard as its representative, has made an offer to provide new financing to Kaisa. “These new money proposals have broad support among the company’s offshore bond investors,” the letter read.
Kaisa did not respond to a request for comment.