Kaisa seeks to tempt creditors with fees

The Chinese real estate developer, which is seeking to restructure its large debt pile, has offered lenders 1 percent of what they are owed upfront if they sign the restructuring deal within the next two weeks.

Kaisa Group, the Chinese property developer with roughly $11 billion in outstanding debt, has offered incentive fees to get offshore creditors to sign up to its restructuring proposal. 

In a statement filed with the Hong Kong Stock Exchange the company offered creditors fees equivalent to 1 percent of the cash owed to bondholders and banks if they agreed to the terms of the restructuring by 24 January. 

Lenders agreeing to the terms after that date but before a four-week timeline expires on 7 February will be paid fees equal to 0.5 percent of what they are owed. 

Kaisa published its restructuring proposal on 6 November and updated it on 24 December clarifying that holders of the company’s convertible bonds, high-yield notes and offshore loan facilities constituted a single creditor class and would have three options under which to exchange their claims under the restructuring. 

Creditors have been invited to sign the restructuring support agreement and either exchange their claims for one of the following:

 

  • new high-yield notes and contingent value rights (CVR);
  • restructured convertible bonds
  • a combination of new high-yield notes, CVRs and restructured convertible bonds. 

 

A second group of Kaisa investors, led by Farallon Capital, drafted its own proposal in November which was rejected by the company. This would have seen the Farallon consortium inject $150 million into the company to extract higher recoveries for bondholders, as part of a larger $650 million plan. 

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.

 

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 outstanding bonds:

  • 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.