What’s new: Defaulted Chinese developer Kaisa Group Holdings Ltd. completed a debt restructuring with lender China Citic Bank Corp., Caixin learned from multiple independent sources.
Citic Bank has been a long-term creditor to Kaisa and helped bail out the company from a previous crisis. In 2015, Citic Bank together with trust companies provided 30 billion yuan ($4.5 billion) of loans to Kaisa after a local government in Shenzhen blocked the company’s real estate sales amid anti-corruption probes.
As part of the rescue loans, 20 billion yuan was exchanged for debt in nine Kaisa projects. As commercial banks are not allowed to invest directly in properties not for their own use, Citic Bank had to repackage the Kaisa project debt and entrust trust companies to hold the equity in the projects, a person close to Kaisa disclosed.
In the past two weeks, Kaisa transferred equity in several Shenzhen projects to a special-purpose entity newly established by Kaisa and Citic Bank, a person close to the matter told Caixin. After the transfer, the projects will be majority owned by Western Trust Co. Ltd., but the actual interests are owned by Citic Bank, the person said.
As part of the arrangement, Citic Bank agreed to extend old debts and provide new funds to ensure completion of the underlying projects, the person said.
The background: Kaisa is one of a raft of liquidity-squeezed major property developers in China including China Evergrande Group whose tenuous conditions are shaking global bond markets. Known as China’s first developer to default on dollar debt back in 2015, Kaisa was labeled a defaulter again after it failed to repay a $400 million dollar bond that matured Dec. 7.
According to the company’s financial report, Kaisa had total assets of 319.1 billion yuan as of the end of June 2021, with liabilities of 237.7 billion yuan. But like most Chinese developers, Kaisa also has large off-balance sheet liabilities that are difficult to estimate.
Kaisa has stepped up asset sales to raise capital. The company put up for sale 18 properties in Shenzhen, mainly urban renewal projects, with a total valuation of 81.8 billion yuan. The list was expanded to 25 projects in November, but no deals have been made.
Contact reporter Denise Jia (huijuanjia@caixin.com) and editor Bob Simison (bob.simison@caixin.com)
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