Kaisa Group has failed to pay interest on roughly $1 billion in US dollar bonds within the 30 day cure period, officially making it the first Chinese real estate issuer to default on offshore debt.
The Hong Kong Exchange-listed company said it hoped to enter standstill agreements with some of its offshore debt holders. It remains focused on reaching a consensual restructuring on its outstanding debts, it continued. Together offshore and onshore debts are understood to be in the region of $10 billion.
Kaisa didn’t make scheduled interest payments amounting to $51.6 million in March and failed to make payment within the 30 day cure period thereafter.
Market experts speculated that the Chinese government might be more willing to let market forces dictate the economy, in light of the Kaisa and a second default this week. A Chinese power manufacture Boading Tianwei also became the first Chinese SOE to default in the onshore bond market having failed to pay interest on a RMB bond, a report from Deutsche Bank highlighted.
“Government support may perhaps be less of a perceived assumption for SOE’s compared to before, particularly for those in non-strategic sectors which in turn could potentially open the door to further defaults in the future,” the report outlined.
Kaisa missed a payment of $16.1 million on 18 March 2015, for the 12.875 percent senior notes due 2017 with $250 million outstanding. It also didn’t make the scheduled interest payment of $35.5 million due on 19 March 2015, for the 8.875 percent senior notes due 2018 with $800 million outstanding.
Earlier this month, former chairman and executive director, Kwok Ying Shing, who resigned on 31 December 2014, was reinstated. The company is reportedly part of an anti-corruption probe. S&P downgraded Kaisa on 24 March to D. The rating agency said it does not expect the company to restructure its debt anytime soon.
Law firm Kirkland & Ellis is advising an ad hoc steering committee of bondholders in relation to $2.6 billion of defaulted bonds. Houlihan Lokey is advising Kaisa on a proposed restructuring, which is subject to negotiation at present with the bondholder committee, comprised of nine funds and more than 25 percent of the outstanding creditors, according to previous reports.
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