Kaisa Group unveils offshore debt restructuring

A steering committee has agreed to the proposal in a non-binding letter of support, while a second plan from a Farallon-led committee has also emerged, according to reports.

Kaisa Group, the Chinese property developer with roughly $10 billion in debt outstanding, announced a proposed restructuring of convertible bonds and high-yield notes late last week.

A steering committee, representing several lenders, has expressed support for the proposed term sheet through a non-binding letter of support, Kaisa said.

Talks are ongoing between the group and the committee about the terms of the agreement.

A second group of Kaisa investors, led by Farallon Capital, has drafted its own proposal, Reuters reported. This would see the Farallon consortium inject $150 million into the company to extract higher recoveries for bondholders, as part of a larger $650 million plan. 

The purchase would result in the consortium owning a 20 percent stake in Kaisa and shareholders getting an additional $5 million in cash, Reuters reported, citing documents it had seen.

The bonds of the developer rallied after the two groups put forward the proposals, Bloomberg reported.

Kaisa has proposed to issue a series of new high-yield bonds in exchange for existing bonds:

  • $250 million variable Series A senior notes due four years after the reference date (which is the earlier of the exchange date or 1 January 2016);
  • $450 million variable Series B senior notes due four-and-a-half years;
  • $550 million variable Series C senior notes due five years;
  • $600 million variable Series D senior notes due five-and-a-half years;
  • and variable Series E senior notes due six years in an amount equal to the exchange date amount less the aggregate amount of the Senior A to D notes.

The group has also proposed to issue contingent value rights to existing bondholders. Holders will be entitled to the payment of 20 percent of the notional value of what they hold upon the occurrence of a certain trigger event.

 

Such a deal if agreed would provide for the restructuring of at least 85 percent of the company’s onshore lenders, Kaisa said.

As part of the plan, Kaisa added that it would restructure existing dollar-denominated and dollar-settled variable rate convertible bonds due four years after the reference date. The restructuring relates to the following bonds outstanding:

  • RMB1.8 billion 6.875 percent senior notes due 2016;
  • $250 million 12.875 percent notes due 2017;
  • $800 million 8.875 percent senior notes due 2018;
  • $400 million 9 percent senior notes due 2019;
  • $500 million 10.25 percent senior notes due 2020.