By Enda Curran, Fiona Law and Chester Yung
HONG KONG--Chinese property developer Kaisa Group Holdings Ltd.
has defaulted on a loan from HSBC Holdings PLC and warned it may
struggle to pay off other debt, adding to the company's woes after
a string of executive resignations.
Late Thursday, the Hong Kong-listed company said it hadn't
repaid a US$52 million loan to HSBC after the U.K. bank asked for
the cash back following the resignation late last month of Kaisa's
chairman, Kwok Ying Shing. The loan has a clause that provides for
full prepayment on the chairman's resignation.
Efforts to seek comment from Kaisa were unsuccessful. HSBC
declined to comment on the matter.
China's real-estate firms borrowed heavily from overseas lenders
in recent years to expand at home, but are now suffering as China's
property market cools and home prices fall.
Kaisa's offshore bond prices tumbled on Friday, pushing up
yields to over 50%. The company's shares have been suspended since
December.
Analysts say that Kaisa has sufficient cash to make the HSBC
repayment but will likely need to renegotiate terms with its
lenders. As of June 30 last year, Kaisa had about six billion yuan
(US$966.9 million) in short-term debt and 9.38 billion yuan in
unrestricted cash Standard & Poor's said in a statement last
week.
"The key thing is whether the company is able to negotiate a
waiver with HSBC," said Yin Chin Cheong, Chinese properties analyst
at CreditSights in Singapore.
Worries about the company's offshore debt have been growing with
Moody's Investors Service recently downgrading the property
developer's credit rating and Standard & Poor's also warning on
the company's outlook last month.
Kaisa warned in a statement to the Hong Kong Stock Exchange
Thursday that more of its debt could be affected by the default,
which may have a "material adverse impact" on the company's
finances. After Mr. Kwok resigned as chairman, Kaisa said it would
sell a vacant plot of land in Shanghai to rival China Vanke Co. to
raise US$194 million.
The circumstances around Mr. Kwok's departure are unclear, but a
number of senior officials at the company based in the southern
China boomtown of Shenzhen departed in December, including its
chief financial officer, vice chairman and the chairman's brother,
Kwok Ying Chi. The company hasn't explained why they left.
The Kwok family owns a 49.3% stake in the midtier developer,
which has a market value of eight billion Hong Kong dollars
(US$1.03 billion). The family isn't related to the owners of Hong
Kong property giant Sun Hung Kai Properties Ltd.
Kaisa listed shares on the Hong Kong Stock Exchange in December
2009 by raising US$445 million from investors. It was backed by
U.S. private-equity firm Carlyle Group L.P's Asia growth fund,
which had invested ahead of the public listing. Carlyle has since
exited its investment in Kaisa.
Shares in the property developer plunged in December after local
authorities in Shenzhen blocked it from selling units in three
residential projects. The reasons for the government's action
aren't known.
"With negative headlines of Chinese property companies, like
Kaisa this time, investors are getting more cautious towards the
entire sector. Some bond investors have tried to reduce exposure in
China's property sector," Ms. Cheong said.
Kaisa isn't the first property develop to have unsettled Western
lenders. In late 2014 Agile Property Holdings Ltd. said its
chairman had been detained, for unspecified reasons, as the
developer scrambled to raise funds in an effort to meet a US$475
million debt payment that was due in December. It later agreed an
extension from HSBC and its unit Hang Seng Bank Ltd., and Standard
Chartered PLC. The company's bonds fell sharply on the news but
have since recovered some ground as the chairman resurfaced.
Esther Fung contributed to this article.
Write to Fiona Law at fiona.law@wsj.com and Chester Yung at
chester.yung@wsj.com
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