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Singapore hedge fund seeks court order to wind up Kaisa on bond payment miss
Kaisa Group received a winding-up petition in Hong Kong from a Singapore-based hedge fund for non-repayment of a yuan-denominated debt and accrued interest. The stock crashed to a record low.
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- Singapore hedge fund Broad Peak Investment Advisers filed a winding-up petition against Kaisa Group on July 6, developer says in stock exchange filing
- Kaisa has defaulted on bank loans or other borrowings totalling 57.92 billion yuan (US$8 billion) at the end of 2022
A housing complex under construction in Dongguan, southern Guangdong province in June 2022. Photo: AFP
Chinese developer Kaisa Group Holdings is facing a legal attack from a Singapore hedge fund, one of an array of its offshore creditors, while it pursues a restructuring plan to address more than US$15 billion of borrowings.
Broad Peak Investment Advisers filed a court petition in Hong Kong on July 6 to wind up the company for non-payment of yuan-denominated debt issued by its Shenzhen subsidiary, Kaisa Group said in a stock exchange filing on Monday. The petition will be heard on September 13, it added.
The Singapore-based firm is suing for repayment of a 170 million yuan (US$235 million) bond issued by its unit Kaisa Group (Shenzhen), the filing said. Kaisa Group tumbled 16 per cent to 17.5 HK cents in Hong Kong trading after the disclosure.
Chairman and founder Kwok Ying-shing, seen during a media briefing in Hong Kong in March 2017. Photo: Jonathan Wong
Chairman and founder Kwok Ying-shing said Kaisa Group will seek legal advice to oppose the petition and protect its legal rights. The creditor’s action does not represent the interests of other stakeholders and may impair the value of the company, he added.
Kaisa Group had almost 110 billion yuan of borrowings at the end of 2022, and defaulted on bank loans or other borrowings totalling almost 58 billion yuan, according to its annual report published in late April. Its shares had earlier plunged on trading resumption in March, following a year of suspension for failing to release its accounts on time.
Some 50 Chinese developers have defaulted on about US$100 billion worth of offshore bonds over the past two years, according to a JPMorgan report in December, with 39 of them seeking debt workout plans with creditors on US$117 billion of stressed debt.
The industry crisis has eased amid policy and market improvements since November. Beijing rolled out a series of measures to alleviate a liquidity crunch, by pushing bank loans, bond sales and equity financing. Those measures may only help developers buy time to fend off creditors, according to KGI Securities.
“The key issue is that property sales remain weak,” said Kenny Wen, head of investment strategy at KGI Asia in Hong Kong. “If mainland developers cannot sell assets [at a good price] or get a white knight to inject new capital, we are going to see more winding-up petitions in the near future.”
Kaisa Group incurred a cumulative net loss of 26 billion yuan in 2021 and 2022 amid a slump in contracted sales nationwide. It has sold a number of assets to raise funds, including 18 projects in Shenzhen worth 81.8 billion yuan in late 2021, and some floor space in The Center office tower in Hong Kong’s Central district.
In November 2021, Kaisa sold a project at Hong Kong’s former Kai Tak airport site to a venture between New World Development and Far East Consortium for HK$1.9 billion (US$243 million) in cash and HK$6 billion in assumed debt, a steep discount to its HK$9.8 billion valuation.
Kwok said Kaisa will keep communicating and working with its offshore creditors on the group’s debt restructuring plan, without giving a specific timeline. It plans to talk to Broad Peak Investment to seek an amicable approach, including persuading the hedge fund to drop the legal action.
“The company encourages all stakeholders to maintain their confidence and support ... an offshore restructuring solution that maximises value preservation,” he said. “The company will continue to firmly uphold the interest of its investors, ensure project delivery, in quality and quantity, and ensure the normal operations and stability.”
