Kaisa avoids liquidation for now but restructuring plan needed

Kaisa avoids liquidation for now but restructuring plan needed

HONG KONG - A Hong Kong court has given Chinese developer Kaisa Group Holdings seven more weeks to work on its debt restructuring plan in order to avoid being liquidated, but also warned this might be the company’s last chance.

“If there’s no progress between now and then, I’m not sure if the company judge is going to grant any further adjournment,” the judge said at a hearing on June 24, while adjourning the winding-up case until Aug 12. “So you really have no excuse if there is no progress.”

No restructuring terms were disclosed in the June 24 court session.

Once a symbol of the boom years in China’s credit markets, Kaisa has more than US$11 billion (S$14.9 billion) of US dollar securities outstanding, one of the largest loads of its kind. The builder, based in the southern city of Shenzhen near Hong Kong, has been fighting against the wind-up petition for almost a year. It’s yet to publicly present a restructuring plan more than two years after defaulting on offshore bonds.

That stumble was among the first signs of broader sector woes amid the pandemic, after nationwide steps to curb developer borrowing and speculation by homebuyers sparked an unprecedented string of debt failures. It was an irony, too, because Kaisa had bounced back after a previous restructuring following an initial dollar note default in 2015 that was the first ever for any Chinese builder.

The liquidation case was first filed by a Singapore-based hedge fund and was then taken over by a key creditor group in March. The creditor group held or controlled more than 35 per cent of Kaisa’s US$12.3 billion of offshore borrowings, according to an exchange announcement from the company dated October.

Lawsuits against Chinese defaulted developers have been building up in Hong Kong courts as their debt situation has worsened, despite efforts from the authorities to boost the industry. Earlier this month, a judge ordered the winding-up of Dexin China Holdings. BLOOMBERG

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