Sunac Buys Stake in Chinese Developer Kaisa for $587 Million

Sunac China Holdings Ltd. bought a 49.3 percent stake in troubled Chinese developer Kaisa Group Holdings Ltd. for HK$4.55 billion ($587 million), according to a filing to the Hong Kong stock exchange.

Sunac, based in Tianjin city, bought the 2.53 billion shares at an average price of HK$1.80 on Jan. 30, according to the filing dated Feb. 4. Kaisa’s shares last traded at HK$1.59 before being suspended on Dec. 29.

The deal may help Kaisa, based in the southern city of Shenzhen, avoid becoming the first Chinese developer to default on a dollar bond. The stake gives Sunac a much-coveted entry point into southern China’s biggest cities, where land for development is scarce. Sunac Chairman Sun Hongbin told Bloomberg News on Wednesday that he signed an agreement with Kaisa’s founding Kwok family for their stake and will make a general offer for the company.

“This is certainly good news for all Kaisa’s creditors,” Hugo Hou, a Hong Kong-based analyst at Haitong International Securities Co., said by phone. “For Sunac, it’s hard to say how good the price is as you don’t know how many land mines are still there.”

The Shenzhen government has been seeking investors for Kaisa, which is being probed over alleged links to a senior official in the city, people familiar with the matter said last month. The company had dealings with Jiang Zunyu, Shenzhen’s former security chief who has been under investigation since October, they said.

Missed Payment

Kaisa missed a $23 million bond payment on Jan. 8 and is coming to the end of a 30-day grace period after the government blocked some of its apartment sales in Shenzhen at the end of last year.

The projects remain blocked by the local land authority, and Sun said in the interview he didn’t know whether the restrictions will be lifted. They are Kaisa’s best assets, with gross margins of 50 percent to 60 percent, according to Citigroup Inc.

“The price looks a bit cheaper to me,” said Alan Jin, a Hong Kong-based analyst at Mizuho Securities Co., citing uncertainty on the blockage in Shenzhen as a possible reason. “I feel this is a good deal for Sunac.”

Kaisa said separately that a unit paid 721 million yuan ($115 million) to buy Chengdu Jinxinrui Property Development Co. in two stages, according to a statement to the Hong Kong stock exchange on Thursday. The target owns land in the southwestern Chinese city of Chengdu.

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