Offshore bondholders from Chinese property developer Kaisa have rejected the struggling group’s offer to extend the maturity of their debt and avoid default next week, according to a letter to the chairman of the company seen by the Financial Times.
The move could worsen the crisis at Kaisa, one of China’s most indebted developers, which has launched a discount sale of its assets in a bid to meet debts including around $ 3 billion in dollar bonds. which will expire over the next 12 months.
A group claiming to represent more than 50% of investors in some of its most urgent debts – a $ 400 million bond that will mature on Dec. 7 – wrote to Kaisa on Tuesday to say that a proposal he made at the end of last month to trade the bonds was “unacceptable”, according to the letter.
The offer, which was offered by Kaisa on November 25, would swap the bonds for new bonds maturing in June 2023, but required the approval of 95% of bondholders.
Kaisa warned in a stock market file that if the offer fails, she may not be able to repay the bonds and may consider debt restructuring.
The bondholder group also proposed a forbearance period – the temporary postponement of loan repayments – to “give Kaisa some leeway” and allay market concerns about the implications of a possible fault.
The bond group includes big investors such as Pimco and Ashmore, according to a person familiar with the matter.
Ashmore declined to comment. Pimco did not respond to a request for comment.
Kaisa is the latest Chinese real estate developer to find itself caught in an industry-wide liquidity crunch that has engulfed its counterpart Evergrande. He rushed to raise funds through asset sales in Shenzhen, mainland China’s most expensive residential real estate market, and Hong Kong in November after missing payments on the wealth management products he he guaranteed, which heightened concerns about his ability to meet his financial obligations.
Kaisa’s dollar bond maturing Dec. 7 is trading at around 45 cents on the dollar, down by half since mid-September, when the company’s debt was still trading at face value. Its Hong Kong-listed shares have fallen nearly three-quarters this year.
“The group believes that the terms of the exchange offer are unacceptable and illustrate a reluctance on the part of the company to consider more appropriate and holistic ways to address Kaisa’s current short-term liquidity challenges,” the company said. letter from the investor group.
The group, which commissioned the financial consultancy firm Lazard to represent it, made an offer to provide new financing to Kaisa. “These new money proposals have broad support among the company’s offshore bond investor base,” the letter said.
Kaisa did not respond to a request for comment.