China developer Kaisa tells court creditors will get less than 5% back if liquidated

Kaisa group

10/10/2023 05:35

HONG KONG, Oct 10 (Reuters) - Struggling Chinese
property developer Kaisa Group  1638.HK  said creditors would
get less than 5% of their money back if it is forced into
liquidation, a lawyer for one creditor who is suing the company
told a Hong Kong court on Tuesday.
    Broad Peak Investment filed a winding-up petition against
Kaisa in July in the Hong Kong High Court in relation to
non-payment of onshore bonds worth 170 million yuan ($23.28
million).
    Many other Chinese developers are also facing winding-up
petitions filed after the sector plunged into a debt crisis in
2021, resulting in many firms defaulting on their debt
obligations. So far only a couple have been ordered to wind up
by overseas courts.   
        The first Chinese property developer to default on its
dollar bonds in 2015 and undergo a restructuring, Shenzhen-based
Kaisa was also among the first developers to default in the
latest property sector debt crisis, which is weighing heavily on
China's economy.
    However, nearly two years after its default on offshore
debt, Kaisa has yet to announce a restructuring plan. 
    At the hearing on Tuesday, barrister James Wood,
representing the petitioner, cited a statement that Kaisa filed
with the court, saying the recovery rate would be less than 5%
in a liquidation scenario, its cash to short term debt ratio is
0.02 and that it is cashflow insolvent. 
    Kaisa has applied to strike out the petition, with its
lawyer arguing in court the bond contract is under mainland
Chinese law and Broad Peak does not have the authority to
commence a winding up procedure in Hong Kong. Hong Kong is a
special administrative region of China but maintains its own
legal system.
    Judge Linda Chan gave the parties 28 days to provide new
expert evidence on whether the petitioner has the authority.
    She also asked Kaisa to submit an update on its
restructuring progress before the next hearing in a date to be
decided later.
    With $12 billion of offshore debt, Kaisa is China's largest
issuer of offshore debt among developers after China Evergrande
Group  3333.HK . 
    It had 232.5 billion yuan ($31.91 billion) of total
liabilities as of the end of June, including 37.6 billion yuan
($18.88 billion) of total borrowings.


($1 = 7.2872 Chinese yuan renminbi)

 (Reporting by Clare Jim; Editing by Kim Coghill)
 ((clare.jim@thomsonreuters.com;))