China developer Kaisa pleads for help, 'patience' as sector's debt woes mount

Shanghai

KAISA Group Holdings needs help to pay investors, workers and suppliers, the developer told a meeting of a Chinese government think-tank, banks and property firms, said a source with direct knowledge of the matter.

China's real estate sector has been hit by a liquidity squeeze, exacerbated by the troubles of China Evergrande Group, the world's most indebted developer. That has resulted in offshore defaults, credit rating downgrades and sell-offs in some developers' shares and bonds in recent weeks. Underscoring the crunch, Fitch downgraded Kaisa on Tuesday (Nov 9), citing a deteriorating liquidity situation. The developer said separately it was trying to solve its liquidity problems and consulting investors in wealth management products about better payment solutions, and pleaded for more breathing space.

"We sincerely ask investors to give Kaisa Group more time and patience," it said in a statement on its official WeChat account on Monday.

Earlier on Monday, Kaisa attended a meeting with the Development Research Center of the State Council as well as other developers and lenders in the southern city of Shenzhen, the source said. The think-tank makes policy proposals on China's national development and its economy, but is not a decision-making body.

At the meeting, Shenzhen-based Kaisa urged state companies to help private firms improve liquidity through project acquisitions and strategic purchases, the source added.

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Participants at the meeting included China Vanke, Ping An Bank, China Citic Bank , China Construction Bank, CR Trust, Southern Asset Management, and developer Excellence Group, said the source.

Kaisa, China's 25th largest developer by sales, said at the meeting it is facing significant difficulties amid rating downgrades and banks curbing loans, the source said. The developer said some financial institutions had transferred funds from its accounts inappropriately and urged all lawsuits seeking a freeze of its assets to be handled centrally in a Shenzhen court, the source added.

Kaisa, Vanke and Citic Bank declined to comment. Excellence and the other banks that participated in the meeting did not immediately respond to requests for comment.

The State Council Information Office also did not respond to a request for comment. The source declined to be identified due to the sensitivity of the matter.

China's property sector troubles have kept global markets on tenterhooks and led to a string of Beijing officials speaking out in a bid to reassure investors the crisis will not spiral out of control. Underlining global concern on the situation, the US Federal Reserve said on Monday in its latest report on financial stability that stresses in China's real estate sector, caused in part by regulatory focus on leveraged institutions, as well as a sharp tightening of global financial conditions could pose some risks to the US financial system.

Trading in shares of Kaisa, which has been looking to sell some of its assets to raise cash, and 3 of its units was suspended last week, a day after an affiliate missed a payment to onshore investors.

Kaisa has the most offshore debt of any Chinese developer, after Evergrande. Evergrande is grappling with liabilities of over US$300 billion, which could pose systemic risks to China's financial system.

Beijing has been prodding government-owned firms and state-backed property developers to purchase some of Evergrande's assets, people with knowledge of the matter previously told Reuters. REUTERS