Kaisa Reports Losses Amid Blockages and Rushed Asset Sales

Updated on
  • Developer had a $238 million loss for the 9 months ended Sept.
  • Kaisa was first Chinese homebuilder to default on dollar bonds

Kaisa Group Holdings Ltd., the first Chinese developer to default on dollar bonds last year, said it suffered losses in 2014 and much of last year after the government blocked it from selling some of projects, disrupting revenue and forcing the company to sell assets at low prices to ease a liquidity squeeze.

The company reported a 1.55 billion yuan ($238 million) net loss for the nine month ended Sept. 30, following a 4.09 billion yuan loss in the previous year, according to an exchange filing Tuesday. Kaisa, which delayed the release of its 2014 annual report to give auditors more time to verify its accounts, provided the unaudited financial results in an update on its restructuring.

Kaisa became the first Chinese developer to default on its debt last year after it failed to pay the coupons on two securities. The company, which got ensnared in an anti-corruption probe, was blocked from selling projects by local authorities and courts in Shenzhen and other Chinese cities. Founder Kwok Ying Shing agreed to sell the family’s stake to rival Sunac China Holdings Ltd., which dropped the deal in May after talks with creditors stalled and Chairman Sun Hongbin found that Kaisa’s situation was “much worse” than he thought.

“Kaisa’s interim results are evidence of a significant drop in realized revenue, which was expected due to government blockage, leading to a weak operating profit,” said Charles Macgregor, head of Asian high-yield research in Singapore at Lucror Analytics. “This was offset to a degree by a large non-payment of interest.”

Bonds Fall

Kaisa’s $800 million 8.875 percent notes due 2018 fell 0.25 cents on the dollar to 79 cents as of 8.57 a.m. in Hong Kong, the lowest in a week.

Most of the blockages and freezing orders from courts have been lifted, according to Tuesday’s statement. A further four projects are still subject to blockage or seizure in Shenzhen, where the developer is based, the company said.

Kaisa was probed over alleged links to Jiang Zunyu, the former security chief of Shenzhen taken into custody in a graft probe, according people familiar with the matter.

Kaisa took a step closer to restructuring its offshore debt earlier this month by sweetening its offer following talks with creditors, winning support from investors owning more than 80 percent of offshore claims.

The company said in the statement it is in talks with creditors holding about 10 percent of onshore liabilities, estimated to be 48.1 billion yuan as of Dec. 31. The other 90 percent of liabilities have been settled or resolved, according to the filing.

— With assistance by Dingmin Zhang

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