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January 10, 2015

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Kaisa fails to repay bond coupon

CHINESE property developer Kaisa Group Holdings Ltd failed to repay a US$26 million bond coupon on Thursday, making it the first Chinese property firm to default on dollar bonds.

The market had speculated that Kaisa would likely default on this 2020 HSBC bond coupon after it defaulted on an earlier HSBC facility in December. A CreditSights report written on Wednesday said that Kaisa will have a 30-day grace period to resolve the current situation if it were to default.

The resignation of Kaisa’s Chairman Kwok Ying Shing on December 31 triggered a default on the HK$400 million (US$51.6 million) facility from HSBC Holdings Plc. Chief Financial Officer Cheung Hung Kwong and Vice Chairman Tam Lai Ling had also quit earlier.

Shenzhen-based Kaisa declined to comment on its debt problem but warned last week in a statement that it may default again after it failed to repay the HSBC debt.

Meanwhile, authorities blocked four projects of Kaisa in Shenzhen, Guangdong Province, on suspicions that Kwok was related to a local corruption case.

Kaisa has dealings totaling 14 billion yuan (US$2.3 billion) with 11 financial institutions, and at least three of them have applied to a court in Shenzhen yesterday to seize Kaisa properties, said Wind Information Co.

Standard & Poors and Moody’s Investors Service have downgraded Kaisa’s ratings. Liang Zhengbang, a senior analyst at Moody’s, said on Wednesday the agency will further cut the rating if a default occurs again.

Kaisa’s stock in Hong Kong fell 47 percent in December, its biggest monthly drop.


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