Kaisa, China, offered to extend maturity on $400 mln offshore bond lapses by offering China to extend maturity
China's Kaisa Group Holdings Ltd said on Friday that it failed to obtain the minimum 95% approval required from its offshore bondholders to extend the maturity of a $400 million note due next week, increasing the risk of a default.
The embattled property developer announced its offer to exchange its 6.5% offshore bonds due Dec. 7 for new notes due June 6, 2023 at the same interest rate if at least 95 percent of holders accepted.
Kaisa said in a statement that "the exchange offer and consent solicitation will not proceed and shall lapse automatically" as the minimum acceptance had not been met.
Kaisa's default on its debt obligation next week would be a massive possibility, which would be its second and will add to the string of defaults in the Chinese property sector now in the middle of an unprecedented liquidity squeeze.
The firm, which became the first Chinese property developer to default on its dollar debts in 2015, stated it had been in talks with representatives of specific bondholders, but no "legally binding agreement" had been entered into yet.
"The business is assessing and is closely monitoring the financial condition and cash position to ease the current liquidity issue and achieve an optimal solution for all stakeholders," it said. "To alleviate the current liquidity issue and seek an appropriate solution for all stakeholders, the firm is assessing and keeping track of the financial condition and cash situation."
The statement said it was the focus of the group."
However, there was no guarantee Kaisa would be able to fulfill the repayment obligations at maturity on Dec. 7, according to it, stating that its failure to repay or reach an agreement with creditors would have "a significant negative effect" on its financial situation.
Kaisa has been attempting to raise money by diversifying assets, including Kaisa Prosperity Holdings Ltd, a Hong Kong-listed property management firm, in comparison to many other Chinese developers facing a liquidity crisis.
Kaisa had stated in its notes exchange offer last week that it might consider a debt restructuring procedure if bondholders did not approve the extension of maturity by 18 months.
According to analysts, Kaisa's failure to acquire a much-needed lifeline from its creditors will also weigh on other smaller developers looking to avoid lengthy and tedious litigation and restructuring processes because of its creditors, the experts said.
Several developers in late October requested that they allow them to extend their offshore bond maturities or undertake a debt restructuring, as a growing number of defaults struck the sector owing to the wide fallout from China Evergrande Group's difficulties.
Evergrande, which has more than $300 billion in debt, failed to pay coupons totaling $82.5 million due on Nov. 6, and investors are trying to see if the developer can meet its obligations before a 30-day grace period ends on Dec. 6.
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