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Chinese property developer Kaisa defaults on dollar debt

Tuesday, April 21, 2015 - 06:53
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Stricken Chinese property developer Kaisa Group Holdings Ltd on Monday said it had defaulted on its US currency debt, making it China's first developer to miss a dollar debt repayment.

[HONG KONG] Stricken Chinese property developer Kaisa Group Holdings Ltd on Monday said it had defaulted on its US currency debt, making it China's first developer to miss a dollar debt repayment.

The Shenzhen-based company failed to pay US$52 million of interest on 2017 and 2018 notes due last month, according to a Hong Kong stock exchange statement.

Kaisa, which is listed on the Hong Kong stock exchange, had until Monday to make the payments after a 30-day grace period.

The company has been in debt restructuring talks with its onshore and offshore lenders after it got into trouble having become embroiled in President Xi Jinping's graft crackdown.

In November Shenzhen authorities blocked sales of its property units allegedly linked to a graft investigation into the city's former security chief Jiang Zunyu, Bloomberg News reported.

The blockage was allegedly meant to pressure company chairman Kwok Ying Shing into cooperating with the probe and left the company with a severe shortage of funds.

Kaisa "is focused on facilitating the release of its 2014 audited financial results... (and) will continue its efforts to reach a consensual restructuring of its outstanding debts," Monday's statement said.

Ratings agency Standard & Poor's downgraded Kaisa to default last month.

Kaisa is in talks with its creditors to push through a bailout bid by rival property developer Sunac China Holdings Ltd.

Sunac agreed to buy a controlling stake in late January, but the deal required a debt restructuring that would leave investors with lower coupons and no repayments for up to five years, Bloomberg News reported.

Kaisa ranked 15th in terms of "comprehensive strength" among China's top 100 listed property firms last year, according to an industry survey, but worries have been mounting of the country's weak real estate sector.

Other Chinese property developers are also in trouble, and S&P warned in a report published last Friday that other defaults can't be ruled out, according to Bloomberg News.

AFP