Wrapup 3: Kaisa, units trading suspended as China property debt crisis routs developers' shares

Kaisa Prosperity Holdings

05/11/2021 05:20

* Kaisa says it faces unprecedented liquidity pressure
    * Document shows Shenzhen asset disposal plans to repay WMPs
    * Property shares fall, China high-yield spreads near record
high
    * Yango Group secures onshore bond extension, sources say

    By Andrew Galbraith, Clare Jim and Donny Kwok
    HONG KONG/SHANGHAI, Nov 5 (Reuters) - Kaisa Group Holdings
Ltd  1638.HK  and three of its units had their shares suspended
from trading on Friday, a day after an affiliate missed a
payment to onshore investors as China's snowballing property
debt crisis jolts other developers.
    Shenzhen-based homebuilder Kaisa, which has guaranteed the
wealth management product, said in a statement on Thursday it
was facing unprecedented liquidity pressure due to a challenging
property market and rating downgrades. 
    Kaisa and its unit Kaisa Prosperity  2168.HK  said in
separate exchange filings on Friday that trading in their shares
was being suspended pending the release of "inside information".
The companies did not elaborate.
    Reuters reported last month, citing sources, that Kaisa was 
seeking buyers for its property management unit Kaisa Prosperity
 and two residential sites in Hong Kong, as it scrambles to meet
a wall of debt repayments.  urn:newsml:reuters.com:*:nL1N2RP0FH
    Kaisa's troubles come amid concerns about a broadening 
liquidity crisis in the Chinese property sector, with a string
of offshore debt defaults, credit rating downgrades and
sell-offs in the developers' shares and bonds in recent weeks.
    Kaisa has the most offshore debt coming due over the next
year of any Chinese developer after embattled China Evergrande
Group  3333.HK , which is reeling under more than $300 billion
in liabilities.
    A finance unit of Kaisa had missed a payment on a wealth
management product (WMP), the developer said on Thursday, adding
it was raising funds to ease the pressure by taking measures
including speeding up asset sales.  urn:newsml:reuters.com:*:nL1N2RV0B3
    Kaisa is planning to sell 18 of its assets in Shenzhen city,
mostly retail and commercial properties, worth a total of 81.8
billion yuan ($12.78 billion) by the end of 2022, according to a
document seen by Reuters on Friday.
    The proceeds will be used to repay the wealth management
products. The developer also has 95 urban renewal projects in
Shenzhen, valued at 614 billion yuan, which can help replenish
its capital after sales upon completion or early disposal.
    Media outlet Cailianshe, citing unidentified sources
familiar with the matter, reported that state-owned enterprises
including China Resources Land  1109.HK  were in talks to buy
some of Kaisa's urban renewal projects in the southern city.
    China Resources did not immediately respond to Reuters
request for comment. Kaisa also did not comment.
     
    DEEPENING LOSSES 
    Kaisa has about $3.2 billion in offshore senior notes due in
the next 12 months, with the next maturity worth $400 million
falling on Dec. 7. It has coupon payments totalling over $59
million due on Nov. 11 and Nov. 12.
    On Friday, a sub-index tracking the mainland property sector
 .HSMPI  fell 2.8%, deepening its losses in the past two weeks
to 17.8%. An index of real estate A-shares  .CSI000952  also
fell 2.1%.
    Shares of Evergrande, once China's largest property
developer and whose debt woes have sparked a liquidity crisis
across China's $5 trillion property sector, fell 2.5% to their
lowest close since Sept. 21.
    The company's 11.5% October 2022 bond issued by its unit
Scenery Journey fell more than 10% on Friday morning to yield
above 300%, according to Duration Finance, leading sharp falls
across developers' bonds.
    Evergrande narrowly averted a default for the second time
last week, but faces another hard deadline on Nov. 10 for more
than $148 million in coupon payments that had been due on Oct.
11.
    Scenery Journey has coupon payments totalling more than $82
million due Nov. 6, though the bonds' terms grant a 30-day grace
period on such payments.
    An ETF tracking Asian high-yield dollar bonds  AHYG.SI  fell
as much as 1.6%, while spreads on Chinese high-yield dollar debt
 .MERACYC  hovered near record highs.
    Developers have scrambled to ease short-term liquidity
squeezes as they face looming debt repayments and tighter
financing conditions. 
    Yango Group  0000671.SZ , which earlier this week reached a
deal with investors to delay principal payments on asset-backed
securities, agreed with investors to extend the payment of its
636.5 million yuan onshore bond due Nov. 19 by one year, two
sources familiar with the matter told Reuters on Friday.
 urn:newsml:reuters.com:*:nB9N2QB028    
    "Kaisa could likely be another Evergrande," said Raymond
Cheng, head of China research at CGS-CIMB Securities, adding
that the companies' woes had intensified market concerns over
developers' liquidity conditions. 
    "Even though the regulators have some easing measures ... it
seems that may not be able to help that much," he said. "Unless
the government has aggressive loosening measures ... we expect
to see more and more developers have problems (paying) off their
debts."
    Local authorities in Shenzhen said in a statement on Friday
they would strictly implement policies on property market
regulation and guard against speculation.
    ($1 = 6.4005 Chinese yuan)

 (Reporting by Clare Jim, Donny Kwok and Anne Marie Roantree in
Hong Kong, Andrew Galbraith and Steven Bian in Shanghai, and
Cheng Leng and Shuyan Wang in Beijing; Writing by Sumeet
Chatterjee; Editing by Jacqueline Wong, Shri Navaratnam and Mark
Potter)
 ((annemarie.roantree@thomsonreuters.com; +852 97387151; Reuters
Messaging: annemarie.roantree.thomsonreuters.com@reuters.net))