Chinese builder Kaisa faces key court test to avoid liquidation
KAISA Group Holdings will square off with creditors in a crucial hearing on Aug 12 (Monday) over its fate, facing a court that may be open to winding up one of the largest Chinese developers.
Sued by its creditors to liquidate after a 2021 bond default, Kaisa has been fighting against their efforts for about a year without publicly presenting a restructuring plan. The lack of progress drove Judge Peter Ng of Hong Kong’s High Court to warn the Shenzhen-based company in June that Monday’s hearing might be its last chance to avoid being put into involuntary liquidation.
Such a ruling would amount to another seismic jolt for the struggling industry that has yet to find its legs despite the government’s supportive measures. Kaisa, carrying US$32.7 billion in total liabilities, would then become the second largest Chinese developer to be liquidated after China Evergrande Group.
“You really have no excuse if there’s no progress,” Ng told the company’s representatives during the June hearing. No further adjournment may be given, he said.
Kaisa, with about US$13 billion of offshore borrowings subject to restructuring, carries one of the largest debt loads in the industry.
Its legal battle was triggered by a winding-up petition first filed by a Singapore-based hedge fund. The case was later taken over by a key creditor group. Those creditors held or controlled more than 35 per cent of Kaisa’s offshore borrowings, according to a company filing in October.
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The parties had made some progress towards an in-principle agreement, the creditor group’s lawyer said in an April hearing.
In the October filing, the company said it proposed converting some debt into shares or exchanging into new US dollar-denominated notes, as well as disposing assets, including urban redevelopment projects in the pipeline. Still, no additional, detailed restructuring terms so far have been publicly released.
Kaisa’s default was among the first signs of spreading woes in China’s property sector amid the pandemic, after developers’ mounting debt and home-buyers’ speculation led to a string of repayment failures.
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The company had earlier defaulted on its US dollar bonds in 2015, the first ever for any Chinese builder, before recovering. BLOOMBERG
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