Kaisa Seeks U.S. Bankruptcy Court Aid in Hong Kong Debt Plan

  • Chinese property developer estimates $14.9 billion in debt
  • Holders of 96 percent of offshore debt back reorganization

Kaisa Group Holdings Ltd., which last year became the first Chinese real estate developer to default on dollar bonds, is seeking to use U.S. bankruptcy law to help its debt reorganization in a Hong Kong court.

The Shenzhen, China-based company filed a Chapter 15 petition in Manhattan court Thursday to seek the U.S. recognition of its debt restructuring agreement with offshore creditors in March. Companies use that provision of U.S. bankruptcy law to deal with U.S. creditors or lawsuits when reorganizing in another country.

The builder, which listed $14.9 billion in debt and $16.1 billion in assets, said that holders of 96 percent of its offshore obligations, which are from outside of China, support the restructuring agreement negotiated in the Hong Kong proceeding. That’s an increase from over 80 percent in March after the company sweetened its offer to creditors to top the required 75 percent majority consent.

Restructuring Support

Given this backing, the company anticipates that the Hong Kong court will approve the plan, Kaisa said in its U.S. court filing. A meeting with creditors is set for May 20.

The firm’s 12.875 percent 2017 notes climbed about 0.1 cent to 81.2 cents on the dollar as of 10:58 a.m. in Hong Kong, according to Bloomberg-compiled prices. They have risen 3.2 cents since March 17 when the builder said it had secured sufficient support to implement its debt workout.

Kaisa said in a filing at that time that investors owning more than 80 percent of offshore claims, which total about the equivalent of $2.6 billion, agreed to support its restructuring plan following “substantive negotiations” with a group of creditors led by Farallon Capital Management LLC and BFAM Partners. The company also provided several options to receive cash incentives, which are triggered under different level of market capitalization in future.

Kaisa had 48.1 billion yuan of onshore liabilities at the end of 2014, and about 90 percent of those obligations had been repaid or dealt with through restructuring agreements up to March 20, according to company filings.

The case is: In re Kaisa Group Holdings Ltd., 16-11303, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

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