Kaisa Bonds Jump After It Says Aims to Resume Shenzhen Sales

  • Its 2018 8.875 percent notes rise most since November
  • Developer faces a counter-proposal from Farallon and BFAM

Kaisa Group Holdings Ltd.’s bonds jumped the most in two months after the Chinese developer said it aims to resume sales of four projects in Shenzhen that courts have blocked it from selling.

Its $800 million 8.875 percent notes due 2018 rose 1.4 cents to 66.1 cents on the dollar as of 4:05 p.m. in Hong Kong, set for the biggest advance since Nov. 9, according to data compiled by Bloomberg. Local courts have been preventing Kaisa from selling a total of 320 units at the projects in the southern city after creditors filed to preserve assets. The builder is “in active discussion with the creditors, with an aim to resume sales of these four property projects in Shenzhen as soon as possible,” it said in a filing Tuesday.

Kaisa, which last year became the first Chinese developer to default on dollar notes, is facing challenges from foreign funds as it aims to restructure its debt. Its proposal giving creditors a recovery of about 75 percent has clashed with plans from San Francisco-based hedge fund Farallon Capital Management LLC and BFAM Partners that offered about 87 percent recovery. Farallon’s approach will burden Kaisa with extra financing needs, the Chinese developer said last week.

Kaisa also said in a separate filing Tuesday that approximately 53 percent of total outstanding bonds and loans have been submitted as supporting notes by its creditors for its own restructuring proposal as of Jan. 26. The deadline for such submission is Feb. 7.

The builder had onshore liabilities of 33.3 billion yuan ($5.1 billion) as of Jan. 25 and China Citic Bank Corp. will continue to provide financing to the firm, it said. Kaisa has reached a 50 billion yuan strategic cooperation agreement with Ping An Bank Co. on fund management and other types of collaboration, the company said on its website Tuesday.

“Kaisa’s Ping An announcement underscores the ongoing recovery in Kaisa’s fortunes that is accruing to its shareholders,” said Benjamin Fuchs, chief executive officer of BFAM. “This highlights even more clearly the need for a more credible settlement with offshore bondholders that is consistent with the underlying business fundamentals.”

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