Oh, Kaisa. Kaisa, Kaisa, Kaisa. You’ve given us so many memories, so many headlines. But this week you finally became China’s first real estate firm to default on US currency securities. How we’ll miss seeing your doomed name in the headlines and deploying that ever-ready descriptor, “troubled property developer”. Alas, you were too beautiful for this world–but let’s remember the good times, yes? Let’s look back on all the fun we’ve had these last few months.
Back in December of 2014 Kaisa’s shares tumbled when its chairman suddenly resigned over the same weekend that the Shenzhen city government announced it had blocked sales of the company’s four projects there for reasons unknown. Then in January the firm appeared to have defaulted on a $52 million loan from HSBC, but analysts said it had plenty of cash on hand. But within a week Kaisa also looked like it had defaulted on a much more sizable sum of $500 million in offshore bonds, though of course it had a 30-day grace period to pay up, and five days later HSBC decided to grant the company more time to repay the first loan. But this tangled tale had only just begun.
At the outset of February CEO Jin Zhigang resigned in what the company described as a move to allow himself more time to devote more time to “personal career development“, never mind that an announcement from rival Sunac China Holdings that it would buy stakes in some projects had fallen short of analyst expectations. But Sunac soon came through, or so it seemed, with an offer to buy nearly half of Kaisa just three days before a grace period expired, promising to buy the remainder once debt was restructured.
Somewhere along the way the firm let slip that its year-end borrowings stood at double the level reported six months prior, but in early March Kaisa finally announced it had, at last, come up with a plan to restructure its onshore debt. (It finally gave some detail on what exactly that meant a few days later.) This brief bright spot was soon overshadowed when the developer admitted a “substantial decline” in profit, though it refused to give any figures. Shortly thereafter creditors rejected Kaisa’s proposed restructuring, adding to the gloom.
But even after all of the above, it was April when then noose truly began to tighten. Early this month, Kaisa said it was delaying its results reports for 2014, citing the possibility of a “significant adjustment” to its unaudited accounts. And while a stock exchange announcement soon claimed the Shenzhen sales ban had been lifted for some units, the company gave no details on the rest. Shortly thereafter Kaisa fired three hires from suitor Sunac, casting doubt on the latter’s acquisition of the former.
Then, finally, this very week, Kaisa — dear, sweet Kaisa — defaulted on some offshore bond interest payments. The Shenzhen-based developer said it had made neither a scheduled payment of US$16.1 million on US$250 million of 2017 notes (due March 18) nor a payment of US$35 million on two 2018 notes (due March 19), even after a 30-day grace period. Sure, we know they’re still seeking concessions from creditors to expedite a Sunac bailout, but well, we’re not holding our breath.
And in any case, there are plenty of other fish in this debt-riddled sea. This week Baoding Tianwei Group became the first state-owned firm to default in China’s domestic bond market. The first, we can only hope, of many more headline-grabbing missed payments to come.