China property debt crisis puts founders on spot

Kaisa Prosperity Holdings

07/12/2021 02:19

(The author is a Reuters Breakingviews columnist.  The opinions
expressed are her own.)
    By Jennifer Hughes
    HONG KONG, Dec 7 (Reuters Breakingviews) - Investors are
pushing troubled developer Kaisa to avoid default and follow
rival Agile’s lead by selling bonds that convert into equity.
That, and other options on the table, present founder-executives
with a hard choice: cede prized majority control, or risk
insolvency. 
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    CONTEXT NEWS
    - Kaisa Group’s investors are the latest to suggest the
troubled developer consider a certain type of convertible bond
to help finance it through the liquidity crunch affecting
China’s vast property sector. 
    - A group of bondholders has offered forbearance on a $400
million bond due for repayment on Dec. 7 if the company will
discuss its suggestions for providing up to $2 billion in fresh
funding to the company. One of them includes buying bonds which
at maturity would be exchanged for shares in Kaisa Prosperity,
the developer’s property management unit, as well as its other
companies. 
    - On Nov. 18 rival Agile Group sold $310 million of
five-year bonds that on maturity will be exchanged for shares in
A-Living, its property management business, priced at that
amount. 
    - Both units were spun off in 2018. Agile holds 54% of
A-Living, while Kaisa owns 67% of its subsidiary. 

 (Editing by Antony Currie and Katrina Hamlin)
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