Chinese Developer Kaisa Officially Defaults, Restructures Debt

In January when we first brought news of one of China's largest developer's inability to cover interest payments on its debt, we raised the question of who's next. Now that it is official - China's first major developer to default on its US currency debt - and property prices are falling at a record rate, we suspect the likes of Wanda and Agile will also start to collapse once again (after being bid up incredibly amid China's latest exuberant bubble).

 

As one analyst noted, now that Kaisa has officially defaulted, “You never know where the skeletons in the closet are or what company will be next."

  • *KAISA DEFAULTS AFTER CHINA DEVELOPER SAYS CAN’T PAY DOLLAR DEBT
  • *KAISA TO CONTINUE TRYING TO REACH CONSENSUAL RESTRUCTURING
  • *KAISA SAYS DIDN'T PAY INTEREST DUE MARCH 19 ON 2018 NOTES
  • *KAISA SAYS FOCUSING ON RELEASING 2014 AUDITED RESULTS

Kaisa 2018 bonds have ripped back from 25c on the dollar to over 70 since the default fears began in January...

 

As the NY Times reported:

Kaisa’s debt problems underscore the slump in China’s property sector, which has been hit by the slowing economy and a series of cooling measures instituted by Beijing to avoid a bubble in what had been an overheated housing market. Government data released this week showed that average new-home prices fell in February at the fastest pace on record.

 

Under Kaisa’s current restructuring proposal, about $800 million of bonds originally due in 2018 would instead come due in 2023, and the interest would be cut to 5.2 percent from 8.875 percent.

Things only got worse in March when housing prices dropped to a new record low:

 

As for the bond restructuring proposal, with this accelerating default, it is likely that any pre-pack agreement is now again in flux.

Also as noted previously, (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.