HONG KONG (BLOOMBERG) - Chinese developer Kaisa Group Holdings began an exchange offer for at least US$380 million (S$520 million) of bonds to avert a default during the nation's real estate cash crunch.
The builder has offered to exchange at least 95 per cent of its US$400 million 6.5 per cent note maturing Dec 7 for new notes with the same coupon maturing June 2023. If the offer to bond holders fails, the developer may not be able to repay bonds and could consider a debt restructuring, it said in a stock exchange filing on Thursday (Nov 25).
Kaisa's bonds fell, while its shares jumped as the stock resumed trading following a three-week halt. In a move that may boost cash, a venture of the developer agreed to sell a land site in Hong Kong, a separate statement showed.
Kaisa is the latest real estate firm trying to shore up its finances as a debt crisis originally centered on China Evergrande Group engulfs the industry. The liquidity crunch follows a government campaign to reduce leverage in the sector, and has been made worse by a slump in home sales and prices.
"Despite our efforts to reduce our interest-bearing debt in response to government regulations, the current sharp downturn in the financing environment has limited our funding sources to address the upcoming maturities," Kaisa said in the statement.
Kaisa is one of China's largest issuers of high-yield United States dollar bonds, with more than US$11 billion of notes outstanding. A failed extension and outright default could pose a significant risk for global investors who are diving back into offshore property bonds on bets that the worst of the recent market rout may be over.
Kaisa's 2021 note dropped 3.2 cents on the dollar to 47.2 cents on Thursday morning, on track for the biggest decline since Nov 9, according to Bloomberg-compiled prices. Its stock jumped as much as 24 per cent in Hong Kong trading and was up 15 per cent at 10.46am.
The bond proposal includes an additional cash offer of US$25 for every US$1,000 of the principal amount exchanged. Still, it could be tough to get across the line with a minimum acceptance of 95 per cent, Bloomberg Intelligence analyst Daniel Fan wrote in a note.
On top of that, Kaisa will still have to deal with another US$2.8 billion in dollar bonds coming due next year, including a US$550 million note in April. A set of Kaisa's offshore bond holders has hired advisers, according to sources.
The statement came hours after Kaisa announced plans to resume trading of its stock, repay overdue wealth management products and speed up the disposal of real estate projects and "high-quality assets".
The company has put 18 projects in Shenzhen up for sale, with a total value estimated at 81.8 billion yuan (S$17.5 billion), Bloomberg reported at the time.