New | Foreign creditors reject Kaisa plan to restructure debt
What's next for China developer Kaisa after debt holders say "no" to proposal
A law firm representing offshore creditors of Kaisa Group Holdings yesterday rejected the embattled mainland developer's proposal to extend its debt by five years and slash coupon rates by up to 66 per cent.
It is not known how many creditors are represented by Kirkland & Ellis.
Kaisa needed holders of 50 per cent of five high-yield notes and 66 per cent of a convertible bond to back its proposal by yesterday. Creditors were widely expected to reject the restructuring plan.
Kaisa has US$2.5 billion in offshore debt and US$7.6 billion in domestic debt.
Analysts said the next step was to renegotiate the terms as debt holders believed Kaisa's assets were still valuable, although the crisis was short-term liquidity.
The risk is if they push back too much, Sunac China Holdings, which has conditionally agreed to acquire Kaisa, may walk away from the deal. In that case, Kaisa's cash flow and viability will come under further strain.
Offshore bond holders could not enforce rights on onshore assets, said Peter Churchouse, a veteran in the city's property sector. "That means they risk being treated worse than equity holders in the capital structure," he said.
Sunac has said it would call off the takeover before a July deadline if a debt agreement was not in place soon.
There are also expectations that the government of Shenzhen, where Kaisa is headquartered, will arrange for state-owned property companies to buy Kaisa. The widely speculated buyer is Overseas Chinese Town, although the property-to-tourism conglomerate denied it in January.
Kaisa's troubles started in December last year when the Shenzhen authorities restricted sales of some of its projects. Until now, it remains a mystery why the ban was imposed and when the government will lift it.
The company is also reportedly under investigation as part of Beijing's widening anti-corruption crackdown.
So far, Kaisa has not announced whether domestic lenders have agreed to extend its debts or cut interest rates to as low as 70 per cent of the central bank's benchmark rates.
It also has not said if separate agreements have been reached with HSBC and ICBC on loans of HK$760 million and HK$1.4 billion, respectively.
The company's cash balance plunged 83 per cent to 1.9 billion yuan (HK$2.4 billion) on March 2 from 11 billion yuan at the end of June last year. The amount included 1.3 billion yuan of restricted cash, or cash to which it does not have access.
