Kaisa to meet offshore bondholders over repayment options, including notes that can be swapped with Sing Tao stock

a 28 per cent stake, its US dollar-denominated bonds

Embattled Chinese developer Kaisa Group Holdings has agreed to meet its offshore bondholders and discuss ways of repaying loans, including selling convertible bonds that can be exchanged for shares of Hong Kong’s Sing Tao News Corporation.

The Shenzhen-based developer will meet New Money Consortium, a group of bondholders, after they on Tuesday rejected its appeal to exchange US$400 million in notes due in a week with a new 18-month bond, said people familiar with the matter.

The group, which says it owns more than 50 per cent of the US$400 million bond, has offered about US$2 billion in new funds to finance Kaisa through seven options, according to a presentation seen by the Post.

Most bondholders were keen to help Kaisa power through its current liquidity crisis, as a possible liquidation would be a bad result for both the investors and the company, the people familiar said.

Among the options presented by the bondholders was an offer to buy new bonds by Kaisa that could be exchanged with equity in some of the developer’s listed units. These include Kaisa Prosperity, the company’s property management unit, and Sing Tao News Corporation, which runs Hong Kong’s oldest Chinese language newspaper.

Kwok Hiu-ting, the 26-year-old daughter of Kaisa Group founder and chairman Kwok Ying-shing, paid HK$369.8 million (US$47.45 million) in February this year for a 28 per cent stake in the media company.

Alternatively, the bondholders could finance third-party buyers with loans up to US$1.6 billion for 18 of Kaisa’s property projects currently on sale in Shenzhen, mainland China’s most expensive city to buy a home in.

Other options on the table for Kaisa include an injection of up to US$2 billion directly into Kaisa’s urban renewal projects, or up to US$1 billion in project loans with a coupon rate of 12.5 per cent, among others.

The bondholders’ offer was presented to Kaisa last week, but it did not provide any feedback. The developer then countered with its exchange offer last Wednesday, which required the approval of 95 per cent of the bondholders. If they did not agree to the exchange, Kaisa said in a statement the same day that it might not be able to repay the offshore notes at maturity, and may consider an “alternative debt restructuring exercise”.

This counter offer was turned down on Tuesday this week in a letter sent by Lazard, the financial advisory firm that has been hired by the bondholders. The letter said the 18-month swap was “unacceptable and illustrated an unwillingness on the part of the company to consider more appropriate and holistic ways”.

“The [bondholders are] willing to discuss providing a forbearance arrangement for a reasonable period of time to help facilitate further negotiations around a more fulsome solution for the company,” the letter said.

Kaisa got back to the investors for further talks after receiving the letter, the people familiar said. A date had been fixed, they said without providing further details.

The bondholders were still willing to give Kaisa more time, but only if the company takes action to adopt some of the options they have listed, or if it rolls out other feasible plans as soon as possible to raise money and repay its creditors.

Kaisa’s dollar bond maturing on December 7 was down by more than 54 per cent since October and was trading at about 44 cents to the dollar on Wednesday. Additional interest payments on other bonds will come due this month and in January, while Kaisa’s nearest maturities in 2022 include a US$550 million note in April and US$1.15 billion note in June.

The current debt crisis is a repeat of the developer’s financial troubles in 2015, when it became the first Chinese developer to default on its US dollar-denominated bonds, destabilising the Asian high-yield market along the way.

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