Exclusive China’s Kaisa plans to sell property management unit and Hong Kong sites – sources

HONG KONG: Kaisa Group Holdings Ltd is looking for buyers for its Hong Kong-listed property management unit and two residential sites in the city, people with knowledge of the matter have said, as it scrambles to cope with a wall of debt repayments.

Kaisa plans to sell its entire 67.18% stake in Kaisa Prosperity Holdings Ltd, a company with a market value of around HK$2.4 billion ($310 million), two sources said. .

No clear buyer has emerged, a source said.

The Shenzhen-based developer is also putting up for sale two residential project sites in Hong Kong that it acquired last year, according to another source and sales presentation documents seen by Reuters.

Kaisa bought the land from Tuen Mun for HK$3.5 billion and said in its interim report released in September that it had a 50% stake in a Kai Tak site worth HK$7 billion. Hong Kong dollars.

Kaisa did not comment on plans to divest her stake in the property management unit and did not immediately respond to a question about residential site sales.

The sources asked to be named because the company’s divestment plans were not public.

Kaisa has the largest offshore debt maturing over the next year of any Chinese developer, after Chinese group Evergrande, which – with more than $300 billion in liabilities – is at the center of a stifling liquidity crisis in $5 trillion Chinese property. sector.

Evergrande made an interest payment for an offshore bond before a grace period expired on Friday, two people with direct knowledge of the matter said, narrowly avoiding a catastrophic default for the second time in a week. .

“SALES OF ASSETS”

Kaisa’s share price was down 2.5% late in the afternoon, while Kaisa Prosperity jumped more than 7% on the news.

The stock has plunged almost 70% this year. Its dollar bond due June 2022 traded at 33.784 cents to the dollar on Friday, yielding more than 270%.

Kaisa in 2015 became the first Chinese developer to default on its dollar bonds, although its business has recovered in recent years.

Its borrowings totaled 123.8 billion yuan ($19.37 billion) at the end of June, compared with 121.5 billion yuan at the end of 2020, according to the interim report. Of this debt, 71.7 billion yuan were dollar senior notes.

The developer has about $3.2 billion of offshore senior notes due over the next 12 months, according to ratings firm S&P, with the next due date of $400 million falling on December 7.

Kaisa also has about $1 billion in offshore interest to pay each year, analysts say.

Ratings firms S&P and Fitch downgraded Kaisa again on Wednesday, both to “CCC+”, citing weakening liquidity, sending its shares to their lowest since their December 2009 debut.

“In our view, the company will need to rely on asset divestitures and successfully improve its capital structure to avoid defaulting on its debt commitments,” S&P said, citing planned divestitures on the mainland and in Hong Kong.

Kaisa’s asset sale plan comes as arch-rival Evergrande teeters on the brink of collapse. A few of their peers have defaulted on offshore debt securities in recent weeks, rattling stock and bond markets.

Struggling to raise funds due to Chinese regulators curbing the accumulation of debt in the sector, some Chinese developers have turned to their property management units to raise funds.

Once the best-selling developer in China, Evergrande attempted to sell 50.1% of its real estate services unit to Chinese counterpart Hopson Development for $2.6 billion, but this month the deal was scrapped. .

Acquisitions targeting Chinese property companies have totaled $33.3 billion in 297 deals so far this year, according to Refinitiv data, up 10% from the same period last year.

(1 USD = 7.7770 Hong Kong dollars)

(1 USD = 6.3908 Chinese yuan renminbi)

(Reporting by Clare Jim and Kane Wu; Editing by Sumeet Chatterjee and William Mallard)