(Bloomberg) — Kaisa Group Holdings Ltd. failed to win bondholder approval for a $400 million debt swap designed to avert default, in a development that could spur contagion risk just as global investors return to offshore property bonds.
The firm had sought to exchange the dollar notes maturing Dec. 7 for new ones due 18 months later. The offer to exchange the notes failed to meet the required 95% approval rate. Kaisa became the first Chinese developer to default on such bonds in 2015.
Grace periods end in just over a week on two bond interest payments by Kaisa, whose shares fell in Hong Kong. A China Evergrande Group unit has until Monday to make two such payments before a possible event of default.
Some of the firm’s dollar notes saw large declines Friday as China’s high-yield market weakened. The company said it plans to engage with offshore creditors to formulate a restructuring plan for its offshore debt.
Key Developments:
- Evergrande Says Formulating Restructuring Plan of Offshore Debt
- China Aoyuan’s Shares Plunge After Warning of Repayment Risk
- Kaisa Moves Closer to Default After Bondholders Reject Swap
- Worst May Be Over for China Junk Bonds, But Not Out of Woods Yet
- Evergrande Tycoon’s New Banker Is the ‘Queen of Shell Companies’
- Moody’s: China’s Property Sector Outlook Is ‘Negative’ (Video)
- Shimao’s Asset Pledge May Ease Concern Over Cash: Credit React
- China Property Default Rate to Stay High in 2022: M&G’s Chartres
Evergrande Formulating Restructuring Plan of Offshore Debt (8:18 p.m. HK)
China Evergrande Group plans to engage with offshore creditors to formulate a restructuring plan for its offshore debt, the developer said in a filing to the Hong Kong stock exchange.
The company received a demand to perform its obligations under a guarantee for about $260 million, and said it can’t guarantee it will have sufficient funds. Creditors may demand an acceleration of repayments if Evergrande fails to meet its guarantee obligations.
Some Evergrande Dollar Bonds Set for Biggest Declines in Months (4:41 p.m. HK)
Some Evergrande dollar notes were on pace for their biggest drops in months, ahead of the expiry of the grace period on a unit’s bond interest payments Monday. The declines also occurred as China’s high-yield dollar bond market weakened Friday. The company has paid multiple bond coupons the past two months near the end of their grace period.
Chinese Junk Dollar Bonds Continue Declines, Led by Developers (3:10 p.m. HK)
Chinese high-yield dollar bonds weakened Friday afternoon, falling as much as 2 cents on the dollar after being little changed in morning action, according to credit traders. The market was on track for a third-straight daily decline and a second-consecutive weekly drop, according to a Bloomberg index.
Kaisa Shares Slide in Hong Kong Trade (1:42 p.m. HK)
The developer’s shares drop as much as 9.8% in Hong Kong to a record low, as investors mull the developer’s failure to win approval from bondholders for a debt swap. It now risks reneging on its obligations unless it can reach an agreement with creditors to delay payment.
China Aoyuan’s Shares Plunge After Warning of Repayment Risk (1:40 p.m.)
China Aoyuan’s stock fell after it warned it may be unable to make certain debt payments demanded by creditors following a series of rating downgrades. Shares sank as much as 18% in Hong Kong, taking its fall this year to nearly 80%.
Kaisa, Aoyuan Dollar Bonds Little Changed Despite Debt News (10:29 a.m. HK)
Both firms’ dollar notes were largely unchanged Friday morning, in line with the broader China high-yield dollar bond market, according to credit traders who said the firms’ latest debt struggles were already priced in.
China Should Improve Rules to Develop Junk Bond Market (8:11 a.m. HK)
China should improve the overall regulatory framework and mechanism of trading defaulted bonds to develop its fledgling onshore high-yield bond market, Securities Times says in a report, citing credit analysts. The report called for a step up in investor protection to encourage institutional investment in the market.
Kaisa Bondholders Reject Chinese Developer’s Debt Swap Proposal (7:37 a.m. HK)
Kaisa failed to win approval from bondholders for the debt swap, it said in a statement. The firm will explore solutions including renewal and extension of borrowings and disposing of assets.
The developer had sought to exchange the dollar notes maturing Dec. 7 for new ones due 18 months later.
A look at Evergrande’s maturity schedule:
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