Kaisa pays bondholders as Sunac makes offer

The Chinese property developer narrowly avoided default on its offshore debt following a purchase offer by Sunac China Holdings.

Kaisa Group Holdings has paid an overdue $23 million coupon on its $500 million 10.25 percent 2020 notes, the struggling Hong Kong-listed property developer announced on Monday (9 February). The payment followed a deal between Kaisa and fellow Chinese developer, Sunac China Holdings Limited, which agreed to purchase a 49.25 percent stake from company executives. 

Sunac is offering HK$1.80 per share to public shareholders, the two firms said on Friday (6 February).

The HK$1.80 offer represents a premium of 13.21 percent over the closing share price before trading in the securities was suspended a month ago after Kaisa failed to make the coupon payment. The offer is a substantial discount on average trading prices for the firm over longer periods of time.

Convertible bondholders have been offered HK0.68 per HK$1 in debt.

Sino Life, which owns a 29.94 percent stake in Kaisa, has declined the offer, the statement said.

In tandem with the coupon payment announcement, Kaisa revealed that banks have frozen cash balances totalling RMB550 million ($88 million; €77.7 million) with another RMB725.56 million transferred by lenders from deposit accounts to offset loans made to the group.

Since the end of January, Kaisa’s creditors have lined up to seek repayment and the company said legal demands for debt repayment totalling RMB28 billion have been filed against the firm.

The offer from Cayman Island-incorporated Sunac is subject to conditions including the resolution of the company’s debt problems through consent or waivers from creditors or via restructuring or refinancing. 

Kaisa’s large debt pile, HK$21.44 billion ($2.76 billion; €2.44 billion) of which may become due under current conditions allowing creditors to trigger clauses in existing agreements, raised fears that it would become the first Chinese property developer to default on offshore debt when it failed to make its coupon payment in early January.

The company started to struggle financially when local authorities in China blocked the sale of properties in Shenzhen and several of the firm’s board members, including its chairman, resigned. Other resignations followed including that of its chief executive officer, Jin Zhigang, last week.

Late last month, before the share purchase agreement with Sunac was announced, Kaisa agreed to sell two Chinese units and 51 percent stakes in two other units to Sunac raising net proceeds of $380 million (RMB 2.37 billion). 

At the end of January, Kaisa announced that it had appointed Houlihan Lokey as financial advisor to improve its capital structure.

In 2014, Kaisa issued $250 million 8.875 percent 2018 senior notes and $400 million 9 percent 2019 senior notes.

Hong Kong-listed Sunac was founded by Sun Hongbin, who holds a 47.12 percent stake in the company. Sunac develops property projects in Beijing, Tianjin, Shanghai, Chongqing and Hangzhou.