In yet another testament that China’s real estate sector is crippling under an acute debt crisis, the contagion has claimed yet another victim— this time property developer Kaisa Group Holdings, which missed a major payment on Thursday.
Shares of Hong-Kong-listed Kaisa were halted on Friday, after the real estate developer— which is the 25th largest in China— failed to make an interest payment on a wealth management product (WMP). According to an exchange filing, the Shenzhen-based developer is facing extraneous liquidity problems, sending its shares falling by nearly 15% for the week and down 70% since the beginning of the year.
According to Reuters which cited people familiar with the matter, Kaisa’s senior executives held talks with WMP investors to go over potential payment plans on Thursday, as the developer faces about $2 billion in outstanding principal and interest. So far, investors have pushed back against such options, and now Shenzhen regulators are scheduled to meet on Friday to discuss the company’s liquidity issues in more depth.
Much like Evergrande, which is beset with a debt mountain of over $300 billion (that no one seems to care about anymore), Kaisa sits at a market value of around $1 billion, and is also one of the largest borrowers of international funds. The company has more than $59 million in coupon payments due on November 11 and November 12, as well as $400 million in offshore senior notes due December 7.
Also similar to Evergrande, Kaisa revealed it has been attempting to accelerate a number of asset sales in an effort to shore up more liquidity. However, that has not stopped from credit agencies slashed the developer’s rating. Just last week, both Fitch Ratings and S&P Global downgraded Kaisa, citing a significant decline in cash flow.
With now yet another developer facing an unprecedented liquidity crisis, China’s house of cards that is the real estate sector continues to inch closer to its demise. Underscoring the point, Chinese junk bond yields have soared to a new record on Thursday, and are currently sitting at above 21%…
Information for this briefing was found via Kaisa and Reuters. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.