A key group of foreign bondholders have agreed to a debt restructuring deal with Chinese property company Kaisa Group.
The agreement, announced by the company on Tuesday (August 20), swaps existing debt for new notes and shares in the company.
The Shenzhen-based developer has been working to restructure its offshore debt since defaulting on $12 billion in offshore bonds in late 2021. The restructuring plan also covers other debts including loans and yuan-denominated asset-backed securities.
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Kaisa is the second-largest offshore debt issuer among Chinese developers after China Evergrande Group and in 2015 became the first among its peers to default on US dollar bonds.
Many Chinese property developer have defaulted since the sector slipped into a debt crisis in mid-2021, and only a handful of companies have completed their offshore debt restructuring.
Shares of Kaisa eased 1.9% as of 0301 GMT on Tuesday, retreating from more than 10% gains in early trading. The Hang Seng Mainland Properties Index dropped 2%.
Kaisa said in a filing that it would issue six tranches of senior notes maturing from 2027 to 2032 with 5% to 6.25% cash interest and eight tranches of mandatory convertible bonds maturing from 2025 to 2032, which will be converted into shares in the company based on an allocation ratio.
To facilitate deleveraging and enhance liquidity, the company said sponsors including chairman Kwok Ying Shing may contribute 115 million yuan of shareholder loan via one or more rights issue.
Kaisa may also elect to propose a management incentive plan to issue up to 3.33% ordinary shares of Kaisa and distributed to its personnel after a tranche of the new notes has been fully redeemed.
The developer said that the key bondholder group, representing over 34% of its debt covered in the restructuring and over 36% of the debt of unit Rui Jing, have agreed to the plan, and it urged other creditors to sign the agreement by September 12 and a 0.1% consent fee in the form of Tranche A New Notes will be provided.
Kaisa is due to face a winding-up petition hearing in Hong Kong on September 9 and a debt restructuring agreement will help to push back against the petition. The bond trustee of the key bondholder group has acted as petitioner since March after a former petitioner withdrew.
- Reuters with additional editing by Jim Pollard
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