China’s Kaisa Delays Results Release Amid Debt Talks
(Bloomberg) — Kaisa Group Holdings Ltd., the Chinese developer in talks to restructure its debt after being tied to a graft probe, postponed its results announcement for 2014 because auditors need more time to verify its accounts.
There may be a “significant adjustment” to its unaudited accounts, Shenzhen-based Kaisa said in an exchange filing Tuesday, without saying when it will release the results. The builder must pay interest on dollar bonds within a 30-day grace period in April to avoid becoming China’s first real estate company to default on U.S. currency securities, after missing initial deadlines earlier this month. Its dollar notes slid the most in three weeks.
The developer is negotiating with offshore investors to restructure its debt, a prerequisite for biggest shareholder Sunac China Holdings Ltd. to complete an acquisition. Sunac Chairman Sun Hongbin said last week overseas creditors didn’t realize how serious Kaisa’s financial position was and Sunac will look for other opportunities if an agreement can’t be reached. The delay may strengthen Sunac’s hand, according to Yin Chin Cheong, a credit analyst at CreditSights Inc.
“Initially the market was expecting Kaisa bondholders to make a counter proposal after Kaisa reports its results,” she said. “But with the time frame being pushed back, there is a higher chance that Sunac could walk away from the Kaisa acquisition because there are other opportunities Sunac could seek.”
Kaisa’s 2018 bonds dropped 2.6 cents on the dollar, the biggest decline since March 9, to 55.3 cents as of 3:15 p.m. in Hong Kong, according to prices compiled by Bloomberg.
“The bonds sold off because people are worried there could be negative surprises as the accounts are delayed,” said Michelle Kuo, a money manager in Taipei at Union Securities Investment Trust Co. “This keeps the market nervous about the Kaisa debt restructuring.”
The company’s shares were suspended. They declined 1.9 percent to close at HK$1.56 on Monday.
Kaisa said earlier this month it was unprofitable last year after a management review of its accounts, without giving details. Sunac discovered the loss after it agreed to buy the developer, people familiar with the matter had said earlier.
The company has asked bond investors to accept lower coupons and defer repayments. Sunac’s Sun called the proposal “reasonable” because Kaisa is not in a financial position to make the interest payments.
Standard & Poor’s downgraded Kaisa to default last week after the developer failed to make coupon payments on two of its dollar-denominated notes. If Kaisa doesn’t pay the about $52 million interest that was due March 18 and March 19 on its 2017 and 2018 notes before a 30-day grace period expires, it would become the first Chinese real estate company to default on U.S. currency bonds.
Kaisa’s troubles started late last year when the government blocked approvals of its property sales and new projects in Shenzhen, linked to an investigation of the city’s former security chief Jiang Zunyu.
Sunac, based in Tianjin, has made a full takeover offer for Kaisa as it seeks to expand to southern Chinese cities such as Shenzhen.