Kaisa avoids liquidation for now but restructuring plan needed

HONG KONG - A Hong Kong court has given Chinese developer Kaisa Group Holdings seven more weeks to work on its debt restructuring plan in order to avoid being liquidated, but also warned this might be the company’s last chance.

The amount of debt being restructured amounts to nearly US$13 billion (S$17.6 billion), the home builder’s legal representative said at the June 24 hearing. While Kaisa and a key creditor group agreed on a four-week adjournment, Judge Peter Ng decided to give the cash-strapped developer more time, adjourning the winding-up case to Aug 12.

“So you really have no excuse if there is no progress,” the judge said. “If there’s no progress between now and then, I’m not sure if the company judge is going to grant any further adjournment.”

Once a symbol of the boom years in China’s credit markets, Kaisa has more than US$11 billion of US dollar securities outstanding, one of the largest loads of its kind. The Shenzhen-based builder has been fighting against the winding-up petition for almost a year. It is yet to publicly present a restructuring plan more than two years after defaulting on offshore bonds.

Kaisa’s default in late 2021 was among the first signs of spreading woes in China’s property sector amid the pandemic, after nationwide steps to curb developer borrowing and speculation by home buyers led to a string of debt failures. Kaisa had earlier defaulted on its dollar bonds in 2015, the first for any Chinese builder, before recovering.

The current winding-up case was first filed by a Singapore-based hedge fund and was later taken over by a key creditor group which held or controlled more than 35 per cent of Kaisa’s US$12.3 billion of offshore borrowings, according to an exchange statement from the company dated October.

The two sides had made some progress towards reaching an in-principle agreement, the creditor group’s lawyer had said in an April hearing. However, no restructuring terms were disclosed in the June 24 court session.

“It’s unlikely” that the creditors will take over majority ownership of the Hong Kong-listed developer, said Mr Tam Lai Ning, who used to serve as Kaisa’s vice-chairman and has been involved in the debt discussions.

“Our business is in urban renewal, and you need expertise for that,” Mr Tam told Bloomberg outside the court. There are only a few things that both parties need to patch up, he said.

Lawsuits against Chinese defaulted developers have been building up in Hong Kong courts as their debt situation has worsened, despite efforts from the authorities to boost the industry. A liquidation petition against DaFa Properties Group also got adjourned on June 24. Earlier in June, a judge ordered the winding-up of Dexin China Holdings. BLOOMBERG