And 2015 Starts Off With A Bang - First Chinese Default Of The Year Hits

Tyler Durden's picture

Well that didn't take long... With the smell of fireworks still lingering in the air, Bloomberg reports that Chinese developer Kaisa Group defaulted on a HK$400 million ($51.6 million) loan triggered by forced repayment terms after the firm's chairman resigned. With shares already down over 50% in December alone, trading is suspended as the company faces what S&P calls "more challenges" ahead and the 2018 bonds have collapsed to just 43c on the dollar (yields over 42%).

The company’s $800 million of 8.875 percent notes due 2018 and sold to investors at par in March 2013 tumbled to 43.846 cents on the dollar as of 10:05 a.m. in Hong Kong, from 66.263 cents on the dollar on Dec. 31, sending yields to 42.485 percent

Its $500 million of 10.25 percent debentures due 2020 slid to 38.025 cents on the dollar to yield 39.601 percent. The securities were sold to investors at 100 cents on the dollar in January 2013.



Kaisa’s stock fell over 50 percent in December -- its steepest monthly decline on record -- as authorities in the southern Chinese city of Shenzhen blocked its projects and key personnel departed. Standard & Poor’s Ratings Services said after two executives resigned that Kaisa may face “more challenges” in the days ahead while Moody’s Investors Service cut the company’s credit rating to B3 from B1.


As Bloomberg reports,

Kaisa Group failed to pay a HK$400 million ($51.6 million) loan, raising questions about the Chinese developer’s ability to pay other debts.


Automatic repayment of the August 2013 term loan facility from HSBC was triggered by the Dec. 31 resignation of Kaisa’s chairman, Kwok Ying Shing, the company said today in a Hong Kong stock exchange filing. The company is assessing whether its failure to pay the outstanding debt plus interest may trigger cross-defaults and have a material adverse impact on the company, it said.




Routine applications for licenses, permits and project approvals haven’t been accepted, while an application for a certificate allowing land acquisitions has been suspended, Kaisa said in a statement on Dec. 21. Approvals for two projects in the city’s Longgang district have been withheld.


Kaisa announced Dec. 10 that Kwok, a co-founder, would resign for health reasons at the end of the month. The company’s shares were halted from trading Dec. 29, the day after Chief Financial Officer Cheung Hung Kwong and Vice Chairman Tam Lai Ling also resigned. The stock will remain suspended pending further announcements, Kaisa said today.

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The first of many we suspect...

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SillySalesmanQuestion's picture

Someone had to be first...I guess they don't have GAAP over there?

y3maxx's picture

From the other Z H article...

The Anglo American Imperialist goal is always the same: if they can't have the run of the place, they make sure that nobody else can either, by setting up a conflict scenario that nobody there can ever hope to resolve....

Truther's picture

It's always been the case for the last 101 years. Though the pay back to the USSA will be a bitch when things come due. 2015 will prove to be a breaking point.

y3maxx's picture

JoeFuture on Jan 1, 8:52 PM said:

"How is the Saudi Royal Family holding on to power? I remember reading last year how they have their own break away threats. Will lower oil prices destabilize their regime? The Saudis themselves must have rebels and Arab Springers. This whole thing could explode in their own faces if their countrymen feel abused by cutbacks in entitlements that may accompany lower oil revenue. I don't like it. I sure picked a heck of a year to quit sniffing glue."

Joe gets it

SAT 800's picture

How, etc.? My understanding from reading about it is that they hold on to power the same way Hitler did. Their State Police, (Gestapo), are extremely effective, and paid informants alwalys rat out whoever is talking trash in the coffee shop this month; then they just disappear. You have to remember the "Arab Springers" were CIA projects; the murderous freaks in LIbya were virtually all foreigners who entered through the porous Southern Borders, complete with modern heavy weapons; which require quite a lot of cash to buy. Saudi Arabia isn't on the CIA hit list; they're are co-conspirators; they pay ISIL, now.

bozoklown's picture

or 16 or certainly 17, well maybe 18 at the very latest

bunnyswanson's picture

Giant publisher erases Israel of its atlas

David1/1/2015 4:42:49 PM

"This is superb. It's made my year."  Mine too!
HowdyDoody's picture

Ooops, someone will be making a visit to their nearest correction camp. Thoughtcrime is a very troublesome thing.

walküre's picture

can't save them all

GAAP is like a frame work or rules of engagement in a casino where everyone can play with the chips they made with a 3D printer in Mom's basement

the Chinese are slowly pulling the rug from under the global economy and they're pulling the curtain to expose the wizard

Fuku Ben's picture

You mean the same principles that are followed by legalized professional criminal organizations?

And the same ones that fully enable the bankrupting of companies like Enron and produce "certified" audits that disclaim any accuracy or liability which are then presented to shareholders and included in annual reports to instill a completely false sense of safety and security?

darteaus's picture

Sure they have GAAP.  How much GAAP you want?  I got it right here!

TheSecondLaw's picture

What difference has having GAAP made in the US?

SAT 800's picture

42% !! Wow. We better get some of those before they're all gone; it's a development Co., right ? Well, I'm sure they'll develop something. What could go wrong ?

taggaroonie's picture

I'm still bullish on ghost city investments

Freddie's picture

Don't worry - The Fed will bail them out.

roddy6667's picture

Thos so-called "ghost cities" are part of a plan to move 300 million people from rural areas to the cities. The housing has to be built before the people arrive, or they will be living in tent cities or under highway oveerpasses. Also, most of the "empty" homes were paid for with cash before they were completed, and are simply a way of investing in future housing needs or as an alternative to bank CD's. Don't believe the hype from writers who have never been to China.

hero HNL's picture

That's typical communist party propaganda. Impossible to

physically relocate that many people.


The real reason for building so many houses is that corrupt

party officials can steal money & invest abroad.

Handful of Dust's picture

The rats are jumping ship with their Loot; first send their kids over, then the wife, then they suddenly disappear and pop up in Laguna Niguel, Banff, Melbourne, or where ever.

The funny thing is the NAR even brags about it!


Fred123's picture

Those 300 million people from the rural areas can feed themselves. Move them to a city and they starve if the gov't can't feed them. Those people are going nowhere and those cities will stay empty.

Carpenter1's picture

One down, 5,000,000,000 to go.

joego1's picture

Goolish on ghost investments! Coming here soon.

Seasmoke's picture

Hurry you can still get a free Mercedes-Benz if you deposit 1 million Yuan for 5 years !!!

HulkHogan's picture

Stop ZH. This is a fucking Penny Stock, going from $3 to 1.60. In its 5 year history as a publicly traded stock, HKG:1638 has traded below its current price on 3 other occasions. Why do I still read this site? If anything, this is a great bottom and I should buy because the Chinese will not let this company fail, being its a new year and this would be the first domino to fall.

q99x2's picture

BTFD but you might to hold out in anticipation to see if it trades again. You can BTFD in any other stocks. The most shorted seem to be pretty good.

Augustus's picture

The company must have not made enough payoffs.  They must be a target of someone to have all of those permits held or turned down.  If the government is not going to let the company fail they shure don't act like it by withholding permits.

indygo55's picture

You are right. I thought that the first minute I began reading this article. But this time the leaders are all gone. That's a different picture for this one.

darteaus's picture

They're gone because they're smart.  Some poor sap will hang after a show trial, ala Martha Stewart, Charles Keating, etc.

The Barney Franks, Jamie Gorelicks ( and Franklin Raines ( of this world don't swing on the gallows.  It's some unconnected sap.

i_call_you_my_base's picture

Hey if you buy it, can I borrow it to lend to someone else?

Yen Cross's picture

 Good Night/ The BoC and Hong Kong? You guys realize the mainland hopium?\

disabledvet's picture

Shanghai up the next fifty percent in one week?

Yen Cross's picture

 Those guys over at " we be shit & false bids" might have some advice?

disabledvet's picture

"Liars Poker." Learn it, live it, love it...

ebworthen's picture

Start the unwind!

Crash derivatives, crash!

vote_libertarian_party's picture

Ok, what am I missing?  Wouldn't 100=par on these bonds?  So the bonds were selling at a negative interest rate for most of the past 2 years???


That can't be right.  Somebody 'splain it to me.

sun tzu's picture

Bonds prices have an inverse relationship with the yields

Let's say the bond was issued at par $100 with a 10% yield, $10.

The bond is now worth $50 because the company is full of shit and investors think they can't make the payments on interest and principal . The yield is still $10, if you get paid. Now the yield is 20% of the $50. 

As bond prices decrease, yield increases. 

Other factors come into play such as changing market interest rates. If you purchase a bond with a 10% yield and a year later the market rate is 15% then the value of your bond goes down. Nobody wants to buy your bond at par anymore because they can buy the new bonds with a 15% yield. 

That's the simple gist of it. 

Pareto's picture

Golf clap.  +1  Nice

Spungo's picture

A country with a billion people has a loan go bad. Shocking.

Yen Cross's picture

one point three billion serfs in china

sun tzu's picture

The first of the thousand zombie companies was revealed.

Apostate2's picture

The Kaisa Group Ltd story has been unwinding since October. A big urban redevelopment co. that has come under scrutiny by the Shenzhen regulatory land and urban planning authorities resulting in a block on at least four of their mega projects either being sold as well as a lock on further projects. Rumour has it that the Chairman and controlling owner was detained by policeat that time. The family sold 576 million shares to their second largest shareholder Sino Life group and the Chairman announced his resignation, not a confidence builder to say the least. The regulators are tight-lipped over the reasons for the blockage but may be related to the anti-corruption push and the 1000 'naked officials' scandal. Nevertheless collusion between developers and officials is 'business as usual' until it isn't.

Yen Cross's picture

 Okay I'll go "private equity"with you.  Let's dance

Apostate2's picture

As far as I know it's 'private equity' not a SOE if I catch your gist. But in a country that needs a Hubble telescope to discern private from public cui bono.

The only 'dance' I do is the one we are all forced to do-- to the music of time.

Yen Cross's picture

   SOE?  What about EOQ-4?

  I guess you don't wake-up on Thursday Housing Prints WoW/ MoM?

 The figures get ree-adjusted.


Apostate2's picture

Ok. I'm having a laugh

(whilst eating Friday lunch) 

sun tzu's picture

My guess is a few people will end up in the ditch with a cranium full of hot lead. That's the way Wall Street scammers should be dealt with here.