Kaisa Group Holdings is selling assets to raise capital for liabilities including a missed payment on a wealth product and US$11 billion of dollar bonds, as it faces a hectoring by Shenzhen’s government and the trading of its stocks were halted in Hong Kong.
The developer has put 18 property projects with 1.45 million square metres (15.6 million square feet) in Shenzhen on the auction block, with a combined value estimated at 81.82 billion yuan (US$12.8 billion), according to a catalogue seen by South China Morning Post.
The developer plans to start selling assets as soon as next month, aiming to wrap up the process by the end of 2022, according to people familiar with the programme, declining to be identified. Kaisa’s spokespeople did not immediately respond to requests for comment.
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Kaisa this week missed a payment on a 12.8 billion yuan wealth management product sold by its Kaisa Finance unit. More than 100 investors of the high-yield financial product protested at the company’s head office, forcing Kaisa Finance executives to face up, ending in a recorded video message by chairman Kwok Ying-shing to plead for more time.
Kaisa faced “unprecedented pressure on its liquidity” because of credit rating cuts and unfavourable market conditions, Kwok said, promising investors that the company will not shirk its responsibilities.
Alarmed at the public outrage sparked by the default, Shenzhen’s authorities summoned Kaisa and the developer Fantasia Holdings to a meeting on Friday, where the housing regulator will discuss the companies’ financial liquidity, according to The Paper. Fantasia, founded by the niece of the former Chinese Vice-President Zeng Qinghong, missed a payment on a US$205 million offshore bond in early October, the first among China’s cash-starved developers to be in default.
Kaisa is the latest among China’s highly leveraged real estate industry to face a liquidity crunch, as the central bank’s tough lending curbs combined with the weakest consumer sentiment in years to weigh on developers. China Evergrande Group faced more than US$300 billion in liabilities, including billions in fees owed to thousands of vendors, suppliers and sales agents, making it the world’s most indebted developer.
As the 27th largest developer in terms of contracted sales in China, Kaisa is the third-largest dollar debt borrower among all Chinese developers, with over US$11 billion of dollar bonds outstanding, according to Bloomberg. The company was the first developer to default on a dollar bond in 2015, and steadily regained investors’ trust after a 2016 restructuring.
Kaisa’s speciality is its track record in revamping shanty towns. It will sell residential projects, office buildings and shopping centres, the most valuable being the 29.8 billion yuan renovation of the Dongjiaotou shanty town to transform it into a high-end residential and commercial area in Shenzhen’s Nanshan district.
The home builder is seeking buyers for its property management unit Kaisa Prosperity Holdings with a market value of around HK$2.42 billion, according to Chinese media. A 67.18 per cent stake in Kaisa Prosperity - equivalent to Kaisa Group’s controlling stake - was mortgaged on September 30 to Shandong High Speed Finance, in exchange for the latter buying US$120 million of Kaisa Group’s notes.
Trading of Kaisa Group and its three associates Kaisa Capital, Kaisa Prosperity and Kaisa Health, had been suspended. Kaisa Group shares plunged 15.1 per cent to HK$1.01 on Thursday before the trading halt.
The developer’s US$400 million bonds due December 7 was indicated at 47.194 cents on a dollar on Friday. Its US$300 million notes due June 1, 2026 was traded at 27.369 cents on the dollar on Friday.
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