Kaisa shares surge in Hong Kong as majority of creditors support debt restructuring plan

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Investors holding more than 75 per cent of its defaulted debts have agreed to support its restructuring terms, filing shows

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A Kaisa sign and flag seen with the national flag at a construction site in Shanghai in December 2021. Photo: Reuters

Cheryl Arcibal

Published: 4:08pm, 17 Sep 2024Updated: 4:46pm, 17 Sep 2024

Kaisa Group surged by as much as 42 per cent in Hong Kong trading as traders bet the Chinese developer will overcome its financial crisis after enough creditors consented to its proposed debt restructuring plan.

The stock rose as much as 3.6 HK cents to 12.2 HK cents, before closing at 10.1 HK cents on Tuesday, according to stock exchange data. It has declined 42 per cent this year. The broader market advanced, with the Hang Seng Index rallying 1.4 per cent.

Kaisa said investors holding 75.11 per cent of its debt and 81.07 per cent of another batch of debt have agreed to support the group’s workout plan, according to an exchange filing on Monday. The consent is a critical lifeline for the Shenzhen-based home builder, after some hostile creditors sued in Hong Kong to recover their debts.

Kaisa’s Future City project in Shanghai on August. 8, 2024. Photo: Bloomberg

The group has proposed to issue US$5 billion worth of new bonds maturing in 2027 to 2032, and US$4.8 billion of mandatory convertible bonds to repay creditors.

The developer has defaulted on about US$12 billion bonds and other borrowings since 2021, triggered by China’s “three red lines” policy to curb excessive leverage in the industry. Kaisa had also defaulted in 2015, when it became the first Chinese developer to renege on offshore dollar bonds.

Kaisa ranks as the second-largest issuer of offshore bonds among Chinese developers after China Evergrande Group. Its total liabilities amounted to 213 billion yuan (US$27.3 billion) on June 30, according to its financial reports. Its losses widened 36 per cent to almost 9 billion yuan in the first half this year, while revenue fell 60 per cent from a year earlier.

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Last week, a Hong Kong High Court rescheduled a hearing to wind-up the developer to March 31 next year in a petition that was first initiated by hedge fund Broad Peak Investment in March. Other bondholders, represented by trustee Citicorp International, took over the case when Kaisa failed to repay a US$750 million bond, according to a September 3 exchange filing.