One more Chinese property developer missed payment on wealth management product

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Chinese property developer Kaisa Group Holdings Ltd said on Thursday its finance unit had missed a payment on a wealth management product (WMP), intensifying market concerns about financial health of the struggling real estate sector.

Payment on an investment product issued by Kaisa Finance and guaranteed by Kaisa Group is overdue, said the developer in a statement.

Some of Kaisa’s retail investors gathered in the company’s Shenzhen headquarter on Thursday to meet with Vice Chairman Mai Fan and management of Kaisa Finance, the firm said. Group chairman Kwok Ying Ching spoke to the investors to discuss payment solutions, it said.

The company has faced “unprecedented pressure on its liquidity” due to unfavorable factors such as credit rating downgrades and a challenging real estate market environment, Kaisa said.  

“Kaisa is a responsible company,” Chairman Kwok Ying Shing told investors, according to the company statement. “If you give Kaisa time, Kaisa has the ability and methods to repay.”

There is 12.8 billion yuan ($2 billion) in principal and interest outstanding on the wealth products, Chinese newspaper Economic Observer reported, without citing any source.

Kaisa’s bonds and shares tumbled on Thursday on mounting concerns over its financial health. Hong Kong-listed shares of Kaisa slumped more than 15% to hit a record low. Its December 2021 6.5% dollar bond plunged more than 17% to 51.5 cents, yielding over 1,000%.

Shenzhen regulators is said to hold a meeting on Friday to discuss liquidity issues at Kaisa and its peer Fantasia, local media Cailianshe reported on Thursday. Fantasia had defaulted on an offshore bond tranche last month.

Kaisa reportedly offered a plan to repay in cash installments, paying 10% of a product’s principal and then 25% of interest every quarter, according to the Hong Kong Economic Journal, citing the discussions. Kaisa said the plan is yet to be finalized. 

The missed payments come about two months after embattled China Evergrande Group faced protests from investors demanding money on similar overdue WMPs. Evergrande had been selling the investments to individuals and even employees to raise funds as other sources of financing dried up in the wake of China’s crackdown on leverage in the real estate sector.

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.

Kaisa has about $3.2 billion in offshore senior notes due in the next 12 months, with the next maturity worth $400 million falling on Dec. 7. It has coupon payments totalling over $59 million due on Nov. 11 and Nov. 12.

It’s been reported that Kaisa is seeking buyers for its Hong Kong-listed property management unit, Kaisa Prosperity Holdings Ltd and two residential sites in the city.

Separately, smaller developer Yango Group, which is seeking to exchange its dollar bonds to help avoid a default, said it has reached an agreement with investors in China to extend principal payments on asset-backed securities.

Shanghai Shimao Co said it will limit investor participation in seven Shanghai-traded bonds starting Friday. It added it sees no major events that seriously harm its repayment ability.

Investor concerns about the broadening impact of the liquidity crunch sparked heavy selling of other Chinese developers’ bonds in onshore markets on Thursday.