China's Kaisa struggles for relief from bond holders as default risk looms

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geemong
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China's Kaisa struggles for relief from bond holders as default risk looms

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China's Kaisa struggles for relief from bond holders as default risk looms


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Chinese developer Kaisa Group Holdings Ltd is unlikely to win bondholders' approval to extend the maturity of a US$400 million bond due next week, analysts say, heaping more pressure on other indebted peers. Kaisa's proposal to delay the maturity of the bond by 18 months comes against the backdrop of growing creditor concerns about Chinese property developers' ability to meet their near-term offshore repayment obligations.

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Some developers in late October called on the regulators to extend their offshore bond maturities or undertake a debt restructuring, as a growing number of defaults hit the sector.

Kaisa's struggle in getting a much-needed lifeline from its creditors will also weigh on other smaller developers that are looking to avoid long and messy litigation and restructuring processes, analysts said.

James Wong, portfolio manager of GaoTeng Global Asset Management Ltd, said that for Kaisa, a debt restructuring is "quite certain", as the threshold of passing the bond maturity extension proposal was too high.

"Investors are waiting for that day (of restructuring) to come" he said, adding smaller Chinese developers will continue to struggle.

Kaisa needs at least 95per cent of its bond holders to approve a proposal to exchange US$400 million, 6.5per cent offshore bonds due Dec. 7 for new notes due June 6, 2023 at the same interest rate.

The firm, which became the first Chinese property developer to default on its dollar bonds in 2015, has said its notes exchange offer will expire 4 pm London time on Thursday unless it extends or terminates the proposal.
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