Stock Plunge Greets Release of Kaisa’s Loss-Making 2021 Results as Trading Resumes

Mainland builder Kaisa Group Holdings posted a loss of RMB 13.3 billion (now $1.9 billion) in its long-delayed 2021 annual report released Thursday, sending shares tumbling when they resumed trade Friday morning after a suspension since last April.

The red ink reversed a profit of RMB 3.5 billion recorded in 2020, Kaisa said in a filing with the Hong Kong stock exchange. The serial defaulter’s revenue and gross profit fell by 36.3 and 70.9 percent respectively to RMB 35.5 billion and RMB 4.6 billion in the year before last.

Kaisa on Thursday also issued its interim results for the first half of 2022, revealing a loss of RMB 7.8 billion after turning a profit of more than RMB 3 billion in the year-earlier period. The Shenzhen-based company’s shares plunged more than 38 percent at the start of Friday trading before regaining ground to end the session 21.4 percent lower.

“We will speed up in resolving risks and getting back on track, while giving play to our competitive edges in respect of products, services and operations to seize the opportunities in the market and realise high-quality and sustainable development,” chairman Kwok Ying Shing said in the interim report.

Complicated Environment

Kwok pointed to the escalation of the Russia-Ukraine conflict and the consecutive interest rate hikes in the US as contributors to a “more complicated and severe” environment in the first half of 2022. The poor performance of China’s economy during the period, aggravated by the COVID-19 upsurge, also led to a sharp fall in the real estate industry, the chairman said.

“In face of severe challenges, property developers increased their promotional efforts, stepped up inventory clearance and accelerated cash collection, while at the same time optimised their organisational structure, reduced costs and enhanced efficiency to struggle through the grim industry landscape,” he said.

For the first six months of 2022, Kaisa and its joint ventures and associates recorded contracted sales of RMB 10.5 billion, a far cry from the RMB 92.3 billion reported for the whole of 2021.

Saddled with $12 billion in offshore debt, Kaisa is China’s second most indebted developer in offshore markets after China Evergrande. The company defaulted on $400 million in dollar bonds in December 2021, nearly seven years after defaulting on a HK$400 million loan in 2015.

More Hot Water

Kaisa reportedly delayed negotiations with offshore bond holders that were expected to kick off in October, citing uncertainty in China’s property sector, according to Reuters. The developer said in its interim report that it remained in communication with creditors and would publish its update on restructuring progress in due course.

In a fresh setback, Oasis Capital Management in January filed suit against Kaisa in a New York court to recover $102.3 million in unpaid principal and interest. Hong Kong-based Oasis said the developer defaulted and failed to make any payment on four bonds it issued that are owned by Oasis with a combined face value of $90 million, along with $12.3 million in total interest.

The loans’ guarantor, Chang Ye Investment Company, also failed to make payments on the notes, which matured in April through October 2022, with the principal and final semi-annual interest payment coming due at that time, Oasis said.