A Kai Tak site which Kaisa bought last year is said to be among the assets up for sale
Kaisa Group Holdings on Monday confirmed reports that it has begun marketing assets in an effort to meet overdue credit obligations, after its four Hong Kong-listed units halted trading on Friday following the Shenzhen developer’s admission on Thursday that it had failed to make payment on wealth management products.
In a post on its official WeChat account, Shenzhen-based Kaisa attempted to calm anxious markets by outlining several measures it has undertaken to solve the problem, including soliciting investor opinions to come up with a more feasible payment plan; speeding up the disposal of high-quality assets in Shenzhen, Shanghai and other places; and withdrawing funds to redeem wealth products.
The group founded and chaired by Kwok Ying-shing pledged to sort out collateralised assets and provide redemption protection for wealth products, as well as speed up sales at real estate projects and realise quick payment.
“At present, the overall asset value of the Kaisa Group is greater than its liabilities, and there are enough high-quality assets that can be processed to provide investors with the follow-up payment of wealth products,” the company said Monday. “In order to work out a more feasible redemption plan as soon as possible, investors are urged to give Kaisa Group more time and patience.”
Damage Control
The assurances from China’s 25th-largest developer by home sales were in response to last Thursday’s news that the group had missed a payment on a wealth management product, with Kwok acknowledging “unprecedented pressure” due to a challenging property market and ratings downgrades.
Kaisa boss Kwok Ying-shing has become a motivated seller
The latest demotion came Tuesday when Fitch downgraded Kaisa’s long-term foreign-currency issuer default rating and its senior unsecured rating by two notches each, to CCC- from CCC+.
Kaisa’s liquidity issues were heightened after missing payments on wealth management products to onshore investors amounting to more than RMB 12 billion ($1.9 billion) or about 10 percent of the group’s interest-bearing debt, Fitch said, citing news reports.
The agency said Kaisa’s debts coming due between now and the end of 2022 equate to $400 million this December, $550 million in April 2022, $1.1 billion in June 2022 and $1.7 billion in the second half of 2022.
In addition, coupon payments on its dollar-denominated bonds run at about $1 billion a year, compared with implied sales of RMB 62 billion (now $9.7 billion) from its property development business in 2020, Fitch noted.
Trading in Kaisa’s HKEX-listed shares was halted Friday and remained frozen Tuesday at HK$1.01 ($0.13), down nearly 72 percent in the year to date.
Fire Sale Options
Hints about which properties Kaisa might unload to raise cash have been leaked in dribs and drabs in recent weeks, as sources told Bloomberg that the group has put 18 Shenzhen projects spanning 1.45 million square metres (15.6 million square feet) up for sale for RMB 81.8 billion ($12.8 billion).
Reuters reported in October that Kaisa planned to sell its entire 67.18 percent stake in its property management unit, Kaisa Prosperity Holdings, and was putting two Hong Kong residential sites it owns, one in Tuen Mun and the other in Kai Tak, on the block.
Kaisa won a tender for the Tuen Mun site in early 2020, paying HK$3.5 billion ($450 million) for the right to build up to 54,152 square metres of homes on a butterfly shaped parcel between Castle Peak Road and Tuen Mun Road near the east coast of Castle Peak Bay in the New Territories.
Kaisa’s Kai Tak asset is a 50 percent interest in a site that was purchased from Goldin Financial Holdings in May 2020 for HK$7.04 billion. The plot known as New Kowloon Inland Lot 6591 has an approved gross floor area of 53,394 square metres for new homes. A residential project commenced in October 2020 and is due to be completed in 2024, according to Kaisa’s interim report for 2021.
In its Monday WeChat statement, Kaisa announced the cancellation of an investor representative meeting this Wednesday, citing public safety considerations brought about by the COVID-19 pandemic.
“Investors are requested not to gather at Kaisa’s office,” the group said.
In its Monday WeChat statement, Kaisa announced the cancellation of an investor representative meeting this Wednesday, citing public safety considerations brought about by the COVID-19 pandemic.
“Investors are requested not to gather at Kaisa’s office,” the group said.
What a desperate attempt to get out of this meeting by citing covid as a reason to cancel. They clearly don’t want to be called out for their failings. Their bonds are trading at 30c on the dollar, and the yield to maturity on next years junk paper is over 200%.