Home Business Kaisa delays offshore debt revamp talks on uncertain sector outlook -sources

Kaisa delays offshore debt revamp talks on uncertain sector outlook -sources

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HONG KONG — Kaisa Group has delayed talks with offshore creditors on debt restructuring terms as the executive now leading the negotiations at the Chinese developer prefers to wait for uncertainty in the property sector to ebb, four sources said.

The second-largest U.S. dollar bond issuer among Chinese developers after China Evergrande Group, Kaisa has been in the process of restructuring its $12 billion offshore debt after defaulting on some bonds last year.

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A long-time senior adviser at Kaisa, L.L. Tam, has taken over negotiations with the bondholders, after former co-chief financial officer Ken Suen left the firm last month, said the sources, who have direct knowledge of the matter.

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Tam wants to delay negotiations until there is clarity about the impact of Beijing’s policy measures to revive the property sector as it struggles with a debt crisis, said the sources, who spoke on condition of anonymity.

The talks, which had been expected to kick off in October, may not start until the first half of 2023, one source said, while another said it could take even longer.

In response to a Reuters request for comment, Tam said the company was actively engaging with creditors and working on the restructuring. Kaisa said it had no further comment, while Suen declined to comment.

The details of Kaisa’s change in management and the halt in talks, which have not been reported before, come as China ramps up support measures to revive the property sector, which accounts for roughly a quarter of the economy.

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As developers struggle to tap new sources of funding in order to wrap up projects and pay suppliers, the government last week outlined the most comprehensive financing package to ease the liquidity crunch.

Although policymakers and local governments rolled out many supportive measures this year to contain the debt crisis and limit its toll on the economy by bolstering housing demand, they have not proved successful.

Kaisa is among a growing number of Chinese developers to have defaulted on offshore debt obligations in the past year, including Evergrande, which is also working to firm up terms of debt restructuring negotiations with its bondholders.

Two of the sources said the new direction of restructuring terms could deviate from initial negotiations, which included swapping part of the developer’s debt into shares in the company or its development projects.

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The delay in Shenzhen-based Kaisa’s debt restructuring negotiations comes as many of its defaulting peers face growing pressure from bondholders to hasten revamp plans before the end of the year.

But it also highlights the challenges many developers face in formulating a repayment plan amid an uncertain outlook as Beijing’s support measures fail to stem a fall in home sales.

Kaisa is “struggling with” a factor that also affects other developers, as the outlook for the property sector is not too clear, said one of the sources.

The first Chinese property developer to default on its dollar bonds in 2015 and undergo a restructuring, Kaisa was among the first developers to default in the latest debt crisis that started unfolding in the middle of last year.

Bondholders have grown impatient after Kaisa struggled to make repayments, and offered several financing solutions, aiming to advance talks.

An offshore bondholder group had offered up to $2 billion to buy some non-performing loans from Kaisa’s lenders, tied to unfinished housing projects. It had also offered to take a 20% haircut on its dollar notes and inject equity capital. (Reporting by Clare Jim; Editing by Sumeet Chatterjee and Clarence Fernandez)



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