(Bloomberg) — Kaisa Group Holdings Ltd. plans to sell property assets valued at almost $13 billion to raise capital after the cash-strapped Chinese developer flagged liquidity stress and missed payments on investment products.
The company has put 18 projects covering 1.45 million square meters (15.6 million square feet) in Shenzhen up for sale, with a total value estimated at 81.82 billion yuan ($12.8 billion), according to people familiar with a briefing by Kaisa’s executives to retail investors on Thursday.
Kaisa’s dollar bonds rallied Friday after the South China Morning Post reported the asset sale plans earlier. Its 6.5% note due December jumped 6.7 cents on the dollar to 52 cents, according to Bloomberg-compiled data, rebounding from a dramatic sell-off this week that had engulfed much of China’s real estate industry.
Shares of the developer and its Hong Kong-listed units were halted Friday pending an announcement containing inside information.
In a potential additional pipeline, Kaisa has another 95 urban renewal projects in Shenzhen worth estimated 600 billion yuan, which may be sold to repay wealth products, the people said. China Resources Land Ltd. and other state firms are in talks to buy some redevelopment projects in the southern Chinese city, Cailian reported on Friday.
Chinese builders are facing an intensifying cash crunch following a government campaign to reduce leverage in the industry. That’s been made worse by a slump in home sales and prices as sentiment among homebuyers weakens. A bond sell-off is making it prohibitively expensive for the nation’s builders to refinance maturing debt.
On Thursday, Kaisa said it faced “unprecedented pressure on its liquidity” due to unfavorable factors such as credit rating downgrades and a challenging property market environment. The missed payments on wealth products guaranteed by the developer come about two months after industry giant China Evergrande Group faced protests from investors demanding money on similar overdue offerings.
“Kaisa’s non-payment of a guaranteed wealth management product may exacerbate the sector’s crisis,” Andrew Chan, a Bloomberg Intelligence analyst, wrote in a note. It “suggests investors need to be aware not only of upcoming public debt payments but of obligations such as WMPs which may not be widely known.”
Read how China’s bond meltdown is bringing hidden bills to light
For the 18 projects, the developer plans to start selling assets as soon as next month through to the end of next year, according to the people. Kaisa didn’t immediately respond to a request for comment.
Trading of shares in its property management arm Kaisa Prosperity Holdings Ltd., health operation Kaisa Health Group Holdings Ltd. and construction equipment provider Kaisa Capital Investment Holdings Ltd. were also suspended, pending inside information of their controlling shareholder, according to filings.
‘All Efforts’
Kaisa is “making all efforts” to resolve its liquidity problem such as by speeding up asset sales, it said in the statement Thursday. The company is seeking buyers for assets including Kaisa Prosperity, but no clear candidates had emerged, Reuters reported last week.
Yet whether the company can pull off disposals of the scale reported remains to be seen. Property developers in China looking to raise badly needed funds by offloading assets are finding it hard to strike deals because many of their peers are hoarding much-needed cash.
The wealth products have 12.8 billion yuan outstanding in principal and interest, according to China’s Economic Observer. Kaisa offered a plan to repay in cash installments, paying 10% of principal and then 25% of interest every quarter, according to the people.
Authorities in Shenzhen were due to hold a meeting Friday to discuss liquidity issues of the company and industry peer Fantasia Holdings Group Co., Cailian reported earlier.
Read more on how Kaisa is alarming bondholders again
Kaisa became a focus of investor concern after it canceled meetings with investors in October, triggering doubts about its liquidity and sending its dollar bonds lower. Downgrades by both S&P Global Ratings and Fitch Ratings a few days later caused a fresh sell-off in the developer’s shares, which have tumbled more than 70% this year.
The first Chinese builder to default on dollar bonds, Kaisa completed a debt restructuring in 2016. Since then, it has grown to become China’s third-largest dollar debt borrower among developers with more than $11 billion of bonds outstanding in the currency. It ranked as China’s 27th-biggest property developer by sales last month.
In addition to Kaisa’s $400 million note due next month, it has $2.8 billion of dollar bonds maturing in 2022, according to Bloomberg data. It’s scheduled to pay an interim dividend of 4 Hong Kong cents per share on Dec. 17, which would cost the company about HK$281 million.
(Updates with potential additional assets to sell in the fifth paragraph)
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