BEIJING (Bloomberg) - Sunac China Holdings Ltd. has signed an agreement to buy 49.3 per cent of troubled Chinese developer Kaisa Group Holdings and will make a general offer.
Sunac is buying the stake from the family of former Kaisa Chairman Kwok Ying Shing and the offer has gone to the Hong Kong stock exchange for approval, Sunac Chairman Sun Hongbin said. Sun said he wants to get Kaisa's US$23 million missed interest on its bonds, that was due Jan. 8, paid before a 30-day grace period expires.
The deal will help Sunac, a developer of high-end apartments, expand into southern China, while Kaisa will avoid becoming the first Chinese developer to default on a dollar bond. The Shenzhen government has been seeking investors for Kaisa, which is being investigated over alleged links to a senior official in the city, after it missed the coupon payment.
"My goal for this year is to enter Guangzhou and Shenzhen, so this is an opportunity," Sun said in an interview at Kaisa's headquarters in Shenzhen. "If Kaisa collapses, there's no winner. But if it's done well, it's a win-win" deal.
Kaisa bonds surged, reversing losses. Its 8.875 per cent notes due March 2018 jumped 19.3 cents to 78.08 cents on the dollar as of 2:41 p.m. in Hong Kong, according to Bloomberg-compiled prices. They earlier fell as much as 2.1 cents. Kaisa's 10.25 per cent January 2020 notes advanced 18.9 cents to 77.14 cents on the dollar and erased a 1.42-cent drop before the news.
Kaisa's troubles first surfaced in December when local authorities in Shenzhen restricted sales of some of its properties. Kwok, the founder whose family trust is the controlling shareholder, resigned in the same month followed by the departure of Chief Executive Officer Jin Zhigang this week.
The developer is being investigated over alleged links to a senior official in the city, people familiar with the matter said last month.
Sunac said on Feb. 1 it agreed to buy four project companies in Shanghai from Kaisa for 2.37 billion yuan ($379 million). The move is meant to inject liquidity into the company and to give confidence to the market, Sun said today.