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Chinese developer Kaisa asks for help and “patience” as the sector’s debt crisis deepens

A picture shows the Kaisa Plaza of Kaisa Group Holdings Ltd on a hazy day in Beijing, China, November 5, 2021. REUTERS / Thomas Peter

  • Kaisa says she needs help paying investors, workers and suppliers
  • Developer met Chinese government think tank in Shenzhen – source
  • News comes amid deepening concerns over China’s real estate sector
  • Fitch downgrades Kaisa, citing deteriorating liquidity

SHANGHAI / BEIJING, Nov. 9 (Reuters) – Kaisa Group Holdings (1638.HK) needs help to pay investors, workers and suppliers, the developer said at a meeting of a Chinese government think tank, banks and suppliers, according to a source Real estate companies with direct knowledge of the subject.

China’s real estate sector has been hit by a liquidity squeeze exacerbated by the troubles of China Evergrande Group (3333.HK), the world’s most heavily indebted property developer. This has resulted in offshore defaults, credit downgrades, and sell-offs on stocks and bonds by some developers in the past few weeks.

To underline the crisis, Fitch downgraded Kaisa on Tuesday, citing a deteriorating liquidity situation. The developer separately said it was trying to resolve its liquidity problems, advising investors in wealth management products on better payment solutions, and pleading for more breathing space.

“We sincerely ask investors to give Kaisa Group more time and patience,” said a statement on their official WeChat account late Monday.

The previous Monday, Kaisa attended a meeting with the State Council Development Research Center, other developers and lenders in the southern Chinese city of Shenzhen, the source said.

The think tank makes political proposals on the national development and economy of China, but is not a decision-making body.

At the meeting, Shenzhen-based Kaisa urged state-owned companies to help private companies improve their liquidity through project takeovers and strategic purchases, the source added.

Participants in the meeting included China Vanke (000002.SZ), Ping An Bank (000001.SZ), China Citic Bank, China Construction Bank (601939.SS), CR Trust, Southern Asset Management and Developer Excellence Group, the source said .

Kaisa, China’s 25th largest developer by revenue, told attendees at the meeting it was facing significant difficulties due to rating downgrades and banks tightening credit, the source said.

The developer said some financial institutions had inappropriately transferred funds from its accounts and requested all lawsuits demanding a freeze on its assets to be handled centrally in a court in Shenzhen, the source added.

Kaisa, Vanke and Citic Bank declined to comment. Excellence and the other banks participating in the meeting did not immediately respond to requests for comment.

The State Council Information Office did not respond to a request for comment either. The source did not want to be identified due to the sensitivity of the matter.

China’s real estate problems have kept global markets in suspense, leading a number of Beijing officials to speak out to reassure investors that the crisis will not spiral out of control. Continue reading

The US Federal Reserve highlighted global concerns about the situation, saying in its latest financial stability report on Monday that stress in China’s real estate sector, caused in part by the regulatory focus on leveraged institutions, as well as a sharp tightening of global financial conditions, posed some risks for the US financial system.

IMMEDIATE DEADLINES

Trading in shares of Kaisa, which wanted to sell some of its assets to raise cash, and three of its units was suspended last week, a day after a subsidiary missed a payment to onshore investors. Continue reading

Kaisa has the most offshore debt of any Chinese developer after Evergrande.

Evergrande is grappling with liabilities exceeding $ 300 billion that, if not managed, could pose systemic risks to China’s financial system.

Beijing has urged state firms and government-backed real estate developers to buy some of Evergrande’s assets, people knowledgeable about the matter previously told Reuters. Continue reading

Some offshore bondholders issued by an Evergrande entity had not received interest payments due November 6th in Asia by Monday evening. Continue reading

Twice in October, Evergrande saw catastrophic defaults on its $ 19 billion bonds.

Such a deadline runs on Wednesday, November 10, for coupon payments of more than 28 148 million.

Evergrande’s shares rose up to 4% on Tuesday.

Regardless, the shares of small developer China Aoyuan (3883.HK) rose over 6%.

Infini Capital told Reuters on Tuesday that it has continuously amassed shares in China Aoyuan’s real estate management unit, Aoyuan Healthy Life Group (3662.HK), over the past few weeks, to become its second largest shareholder.

Aoyuan Healthy said last week it was in preliminary discussions with several independent third parties about the possible divestment of stake in certain entities.

Infini hopes Aoyuan Healthy will sell the entire company, not its assets.

Reporting By Samuel Shen, Cheng Leng, and Tony Munroe; Additional coverage from Joy Leung and Clare Jim in Hong Kong; Letter from Anne Marie Roantree; Editing by Kim Coghill and Muralikumar Anantharaman

Our Standards: The Thomson Reuters Trust Principles.

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