Kaisa begins $12b debt restructuring after missing pay date

Chinese property developer Kaisa Group Holdings Ltd has started work on restructuring its offshore debt worth $12 billion, a source with direct knowledge of the matter said on Thursday, after missing a bond payment deadline this week.

Kaisa, China’s largest holder of offshore debt among developers after China Evergrande Group, did not repay $400 million of bonds that matured on Tuesday, triggering cross-default provision on all its offshore bonds and prompting a downgrade to “restricted default” by Fitch Ratings.

Its restructuring will be among the biggest in China, even as uncertainty continues about the fate of Evergrande’s missed bond coupon payments this week that would trigger cross-default on its roughly $19 billion of international bonds, with possible ramifications on China’s economy and beyond.

Evergrande, which has over $300 billion in liabilities and is at the heart of a property crisis in China, has not announced if the bonds have formally defaulted, but said last week that it planned to forge ahead with a restructuring of its debt.

Fitch also downgraded Evergrande to “restricted default”.

Kaisa, which has not said if it has formally defaulted, is expected to soon sign a non-disclosure agreement (NDA) with Lazard, the adviser of a group of bondholders, the source and another person said. The NDA will lay the groundwork for further discussion on forbearance and financing solutions.

The bondholders hold over 25 per cent of Kaisa’s $12 billion offshore bonds. Formal discussions on forbearance and financing plan could commence once the NDA is in place, the people said, who declined to be named as the talks are confidential.

But an agreement is unlikely in the next few weeks as the talks are still at an early stage, the first source said.