Chinese Developer Kaisa On Verge Of $5Bn Default; Who's Next?

Tyler Durden's picture

“You never know where the skeletons in the closet are or what company will be next," warns one Chinese credit analyst and as the CNY30 billion indebted Chinese developer Kaisa Group (that we initially discussed here) admits it can’t say if it plans to meet a bond deadline today as a local news website said lenders took steps to preserve assets. The builder of residential communities and shopping centers must pay about $26 million in interest on its 10.25 percent 2020 debentures today (which appears unlikely) and its bonds have crashed to below 30c. The big question, as Bloomberg notes, is who's next?

Kaisa's capital structure (over CNY30 billion in debt) not so different from every other massively levered Chinese developer...


As Bloomberg reports, we are at the deadline for Kaisa...

Kaisa Group Holdings Ltd., the Chinese developer that defaulted on a loan last week after its chairman departed, can’t say if it plans to meet a bond deadline today as a local news website said lenders took steps to preserve assets.


The builder of residential communities and shopping centers must pay about $26 million in interest on its 10.25 percent 2020 debentures today, according to the prospectus. The developer can’t answer the question of whether it plans to meet the payment, Lin Yikang, in the company’s media and public relations management department, wrote in an e-mailed reply.




The notes fell to a record closing low of 29.9 cents on the dollar yesterday and were at 32.1 cents as of 4:08 p.m. in Hong Kong, according to prices compiled by Bloomberg.

*  *  *

So whos' next?

China’s junk dollar notes have lost 3.9 percent in 2015, the worst start to a year ever in Bank of America Merrill Lynch indexes, after Kaisa Chairman Kwok Ying Shing resigned days after two other executives left their positions. Developers that rely on personal relations in securing land from the government are among the most at risk from President Xi Jinping’s local-government financing shakeup and anti-graft drive.


“You never know where the skeletons in the closet are or what company will be next,” said Charles Macgregor, head of Asia high-yield research at Lucror Analytics Pte, the Singapore-based independent credit researcher focused on high-yield markets. “There’s always been a bit of a corporate-governance premium on Chinese developers and that will increase because of the latest challenges.”



Failure to pay today's coupon, could mark the first default by a Chinese developer in the offshore bond market. Last March, Shanghai Chaori Solar Energy Science & Technology Co. became the first entity to default in the Chinese onshore note market.


“This year, aside from the usual worries about refinancing risk, we face the challenge of assessing the impact of a government clampdown on corruption and dealing with idiosyncratic risks,” said Raymond Chia, Singapore-based head of Asia credit research at Schroder Investment Management Ltd. The firm had $447.7 billion under management as of Sept. 30.


“We are not constructive” on Chinese property bonds, said Michael Ganske, London-based head of emerging markets at Rogge Global Partners Plc. His firm manages $55 billion bonds globally. “It’s just an overheated sector and probably one of the main weaknesses in the Chinese economy.”

*  *  *

This seems to sum it all up nicely... (away from the exuberant equity markets)...

“Everyone is rethinking risk right now and so are we,” said Singapore-based Brayan Lai, the head of research and money manager at One Asia Investment Partners. The credit hedge fund has about $200 million of assets. “There are uncertainties about Chinese companies” amid concerns over Greece and U.S. debt markets, he said.

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Hitlery_4_Dictator's picture

Please tell me, so what?

Well, I've been to Hastings and I've been to Brighton,
I've been to Eastbourne too.
So what, so what.
And I've been here, I've been there,
I've been every fucking where.
So what, so what.

kliguy38's picture

Who's next...........heheheeh.......try about 4000 companies over there for starters

Vampyroteuthis infernalis's picture

Chinese care less they default on foreigners. Managment is laughing, "Suckers!"

Stanley Kubrick's picture

Default?  Why not?

Everybody's doing it.  Or soon will be.

Got gold?


Ying-Yang's picture

10.25 percent interest


ThroxxOfVron's picture

"10.25 percent interest

Really? "



& When they default this afternoon it will become apparent why.

Freddie's picture

10.25% interest?

Too Fuk Hi

Antifaschistische's picture

Here's the so what for China.

I've walked Chinese streets and talked with the guys on the street selling "apartments".  I did easy math to quickly see that average small nothing fancy apartments were selling at 30x the average annual income.  OUCH.  Something ain't right.

So, when the bubble burst and the $100k apartment has to sell for $32k there's going to be a lot of very ticked off Chinese who bought from the guy on the street.

So...for us, the question is what is the consequence of a billion Chinese realizing they aren't as wealthy as they thought they were?   Well, American's will soon realize that also.  But it's not a "so what" point...but, it will impact us also as they demand higher wages, buy fewer designer purses and Ford cars, etc.   We'll all eventually sink together.


PrayingMantis's picture

“When you point a finger at the moon to indicate the moon, instead of looking at the moon,the stupid ones look at your finger.” 
    ~ Mao Tse-Tung


jbvtme's picture

unless, of course, the guy pointing his finger is your proctologist...

Larry Dallas's picture

Always watch how the debt trades. The debt never lies.

Theta_Burn's picture

You all realize this WONT be news tomorrow right?

PontifexMaximus's picture

Should be bullish. Any bondholders around? Ahh, only instit. money, so OPM. So, who cares, move along, next pls.

Mike Honcho's picture

The end of the false Chinese construction boom has been well documented on ZH.  Its a topic that gives the ZH hater, sky is falling timeline crybabies, a little less to naysay about.  If in China, don't look up.

KnuckleDragger-X's picture

Nothing to see here, move along....

PontifexMaximus's picture

BTW, any comments about Greece, Grexit blablabla, default, not default? Did I miss anything?

Stoploss's picture

Did they put the plastic sheets on the bed?

unplugged's picture

nobody is next - the bailouts will continue until morale improves

Dr. Engali's picture

Why would China bailout the western bankers? They have all this nice new infrastructure and don't have to pay for it.

hackne's picture
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Theta_Burn's picture

Up front fees to expensive..

Yesterdays email told me of a atm card that was all ready to send to me after i pay a $95 holding security fee.. this was for $1.2mil

Way better deal in my opinion..

Global Hunter's picture

Thumbs up for being brave enough to use a gmail account to conduct your illegal business!

NoDebt's picture

He's new at spamming.  Give him a break.  Perhaps he should change is screen name to 'hackme'.

pods's picture

The only thing "large" going on is going to be your poopchute.

Did ya ever think that many people here who rail against the bankers hate them for STEALING?


Theta_Burn's picture

Hate to pollute the thread....

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lakecity55's picture

Hello, Dearest Christian Sir.

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Contact me ASAP

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lakecity55's picture

DO NOT click on his link. Your IP/MAC might make you an unwitting accomplice.

How this type of post ended up on ZH is very concerning to me as a poster!

Dr. Engali's picture

WTF Tyler? get rid of this asshole. 

lakecity55's picture

Yes, please Suspend.

This is an outright Illegal pitch.

You could be Liable. I am telling you this as a retired LEO.

You are putting every poster here in potential danger because of this guy.

I do not care where your servers are. There are Internatinal Agreements for this scam.

You could be shut down.


redd_green's picture

Re :"Only serious individuals should contact her"  well that about leaves 99.999% of us ZH'ers out.  

CHX's picture

Seems like there are larger and larger dominos falling just about everywhere. Good to know that the recovery is just around the next corner. NOT.

elegance's picture

China bailing out Russia any minute now, any minute...

kowalli's picture

we don't need bail out...

lakecity55's picture

They need no bailout. They have raw materials to trade.

You must read the Western Press.

I never read the Western Press: except to verify the Lies.

Americans are in for a Big Shock. It will be interesting.

By then I will be in my redoubt in South Asia.

In 20 years of world travel, I have found the news sources which reveal the truth, by constant research.

The ignorance of Americans astounds me. I admit, I Travel. I have the opportunity of being anywhere in the world in 24 hours. But, the fact that Americans are not spending time to study world events is very Troubling to me. Dammit, when I was a young guy, there was more attention to these factors.

We need People to WAKE UP!


walküre's picture

my "redoubt" is Southern France (hillside, quaint and unassuming) but to each their own...

Dr. Engali's picture

Time for a debt jubilee. Who the fuck cares if the bankers lose their ass? They conjured this shit up out of thin air in the first place.

ThroxxOfVron's picture

Cultural Revolution inversion.

Fix It Again Timmy's picture

Ya want me to buy your bonds?  Then let me see your income stream or is it an occasional drip?....

youngman's picture

You build vacant cities what do you expect.....the concrete guys wins really is amazing what China has done in the last 35 years though....pretty impressive stuff....they were nothing when Nixon opened the borders with them...

Jason T's picture

They were nothing still when I graduated high school in 1996.  

Prob with China is their culture is a mess .. charactors are simply not trust worthy in the aggregate.  

Have you ever tried to wait in line in China?  I rest my case.

Peter Pan's picture

i am just wondering whether at some future point in time, the Chinese government will ask for certain Chinese citizens that absconded to the west with piles of cash, to be deported back to China and for their assets to be frozen?

youngman's picture

Yes they are a shady bunch...and most of their gains were from stealing it...IE reverse engineering......they are full of bad..they are hard workers...

mattgallis's picture

Your avatar creeps me out.

Fuku Ben's picture

Didn't ZH have a good summary list of potential defaults with dates and amounts last year?

T'would be great to have an updated version

walküre's picture

haha.. the lenders will repo all those ghost malls and ghost cities

lenders took steps to preserve assets

maybe they will repo the concrete mixers and brooms also?

they're all fucked beyond imagination