New | China’s Kaisa on track for revival, few other developers on rating agencies’ watch list

Kaisa Group Holdings, the first mainland Chinese developer to have defaulted on its offshore bonds, is close to a debt restructuring deal to revive itself from the brink of bankruptcy, but investors still need to be mindful of other developers with weak sales execution and high levels of leverage.

Almost a year ago, Kaisa’s crisis snowballed quickly from a ban by Shenzhen’s housing bureau against the sale of some key projects for reasons still unexplained by both sides yet widely known to the industry as its close relationship with a former local official brought down in the anti-graft campaign by Beijing.

Now, the company is striving to restart selling these projects in Shenzhen soon, which if successful, will eliminate lingering worries about its political risks.

“Our cash flow is improving,” said Li Xiaogang, head of public relations. “We face no administrative obstacles now.”

Since rival Sunac China stepped away from a takeover deal in May, Kaisa has reshuffled its top management team and has reached framework agreements with onshore creditors, including the biggest one -- Bank of China.

That enabled it to launch projects in a number of cities, including Hangzhou, Nanjing and more recently Guangzhou. Due to competitive pricing under a policy-induced housing recovery, sales performance has been strong.

Last month, the troubled developer registered with the government the contracts with those buyers who paid deposits for units at the Kaisa Qianhai Plaza before the sales ban was imposed. The relief for those buyers is that price will remain the same although housing inflation is high during this period in the neighbourhood.