Kaisa Group Holdings Defaults On US Debt


Chinese property developer Kaisa Group Holdings Ltd has defaulted on US$52 billion of interest payments on two offshore bonds, triggering widespread concerns that international creditors could be exposed to potential losses.

The Shenzen-based company has become the first Chinese real estate company to default on its US currency debt.

In a statement to the Hong Kong stock exchange on Monday, Kaisa Group Holdings Ltd announced that it had defaulted on a scheduled interest payment of US$16.1 million on US$250 million of 2017 notes that were due on March 17.  It had also missed a scheduled interest payment of US$35.5 million on two 2018 notes due on March 19.  The struggling company had been granted a 30-day grace period but had still failed to make the payments.

In February, Kaisa Group Holdings revealed it was trying to service US$10.4 billion of debt owed to offshore and onshore lenders. The company's troubles began last year when the local government blocked sales or placed restrictions on 11 of its projects. Kaisa Group Holding Ltd chairman and founder Kwok Ying Shing also resigned in December.

With overseas note holders purchasing US$21.3 billion of bonds issued by Chinese property companies, Bloomberg Business reported that there were concerns more defaults would occur.

“It’s been a canary that has been chirping for some time,” Brandywine Global Investment Management LLC money manager Gary Herbert told Bloomberg Business. “This is the beginning of an adjustment period in China that will see a lot of credit investors, who were chasing the promise of higher yields, ultimately disappointed.”

In its statement, Kaisa Group Holdings Ltd stated that it was "focused on facilitating the release of its 2014 audited financial results and following that release, will continue its efforts to reach a consensual restructuring of its outstanding debts. In view of the foregoing, the Company hopes to enter into standstill agreements with certain of its offshore debt holders as soon as practicable."

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