Kaisa Warns of Further Losses as Winding-Up Hearing Looms

Kaisa Group Holdings on Wednesday warned of a likely loss in the range of RMB 6 billion to RMB 7 billion ($820 million to $960 million) for the first half of the year, adding to the mainland builder’s sea of red ink stretching back to 2021.

The result would represent an improvement on the RMB 7.8 billion net loss recorded in the comparable six-month period of 2022, offering a trace of good news as the Shenzhen-based company faces a winding-up hearing scheduled for next month.

The lower expected net loss is mainly due to a decrease in exchange loss on debts denominated in US dollars and a decline in net fair value losses on financial assets, Kaisa said in a filing with the Hong Kong stock exchange.

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.

Penny Stock Blues

Kaisa’s HKEX-listed stock is down 69 percent in price since trading resumed on 10 March after a nearly year-long halt. The shares now hover around HK$0.20 ($0.03) each.

On 9 March, Kaisa posted a loss of RMB 13.3 billion in its long-delayed 2021 annual report, reversing a profit of RMB 3.5 billion recorded in 2020. Later that same month, the group chaired by Kwok Ying Shing revealed a further loss of RMB 13 billion for 2022.

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

As the restructuring story drags on, Kaisa’s legal woes have mounted. Oasis Capital Management in January filed suit against Kaisa in a New York court to recover $102.3 million in unpaid principal and interest. Then in April, a Hong Kong arbitrator dismissed the company’s $146.9 million claim against Chinese developer Nam Tai Property over a disputed private placement.

Courting Danger

Kaisa announced on 10 July that Singapore-based Broad Peak Investment Pte Advisers had filed a winding-up petition against the company in Hong Kong’s High Court.

The case relates to the non-payment of certain RMB-denominated corporate bonds issued by Kaisa Group (Shenzhen) in the principal amount of RMB 170 million with accrued interest.

Kaisa said it would oppose the petition “vigorously”. The High Court has set the first hearing date for the winding-up petition on 13 September.