A Hong Kong court has given Chinese developer Kaisa Group Holdings Ltd. seven more weeks to work on its debt restructuring plan. This will help Kaisa Group avoid liquidation, but also warned this might be the company’s last chance. The Shenzhen-based developer has been working to restructure its offshore debt for two years after defaulting on $12 billion in offshore debt in late 2021.
“If there’s no progress between now and then, I’m not sure if the company judge is going to grant any further adjournment,” the judge said at a hearing Monday, while adjourning the winding-up case until Aug. 12. “So you really have no excuse if there is no progress.”
Kaisa avoids liquidation
A Hong Kong court on Monday adjourned a hearing into a petition seeking liquidation of Kaisa Group until Aug. 12, giving the embattled Chinese developer some respite as it works on its debt restructuring plan.
Citicorp International, the trustee of a major group of bondholders, has been acting as petitioner since March after a former petitioner withdrew.
Kaisa’s default
Kaisa is China’s second-largest issuer of offshore debt among property developers after China Evergrande Group and was the first Chinese property developer to default on its U.S. dollar bonds in 2015.
Kaisa Chairman Kwok Ying Shing returned to mainland China from Hong Kong for the first time in almost a decade to get regulatory approval for an offshore debt restructuring, Reuters reported last week.
Kwok travelled to Shenzhen for talks with a government committee and onshore regulators about two months ago and is still there, sources said.
The developer originally told the Hong Kong court in April that it aimed to iron out the terms by the end of May.
Kaisa’s financial troubles
No restructuring terms were disclosed in Monday’s court session.
Once a symbol of the boom years in China’s credit markets, Kaisa has more than $11 billion of dollar securities outstanding, one of the largest loads of its kind. The builder, based in the southern city of Shenzhen near Hong Kong, has been fighting against the wind-up petition for almost a year. It’s yet to publicly present a restructuring plan more than two years after defaulting on offshore bonds.
Kaisa’s restructuring plan
That stumble was among the first signs of broader sector woes amid the pandemic, after nationwide steps to curb developer borrowing and speculation by homebuyers sparked an unprecedented string of debt failures. It was an irony, too, because Kaisa had bounced back after a previous restructuring following an initial dollar note default in 2015 that was the first ever for any Chinese builder.
More Chinese liquidation cases
The liquidation case was first filed by a Singapore-based hedge fund and was then taken over by a key creditor group in March. The creditor group held or controlled more than 35% of Kaisa’s $12.3 billion of offshore borrowings, according to an exchange announcement from the company dated October.
Lawsuits against Chinese defaulted developers have been building up in Hong Kong courts as their debt situation has worsened, despite efforts from the authorities to boost the industry. Earlier this month, a judge ordered the winding-up of Dexin China Holdings Co.
China Evergrande was ordered to liquidate by a Hong Kong court earlier this year and a growing list of companies in the sector, including Country Garden, are fighting against liquidation petitions filed by creditors.
