China Property

Chinese developer Kaisa to seek court approval for offshore loan restructuring plan

PUBLISHED : Friday, 19 February, 2016, 10:59am
UPDATED : Friday, 19 February, 2016, 10:59am

Troubled Chinese developer Kaisa Group said it would seek court approval for its offshore restructuring plan as soon as possible despite still lacking majority support from bondholders.

In a statement to the Hong Kong stock exchange Wednesday night, the Shenzhen-based developer said investors holding in excess of 58 per cent of its outstanding offshore loans and bonds have signed its restructuring support agreement.

Tam Lai Ling, Kaisa’s senior adviser, said the company would seek approval from both Hong Kong and Cayman Island courts to hold a creditors’ meeting as soon as possible to discuss its debt restructuring plan, even though it hasn’t received 75 per cent shareholder support – the threshold needed to proceed with its plan.

“Some creditors show support for our plan but they have not yet signed the agreement,” Tam told the South China Morning Post. He said some creditors preferred not to sign because they would be restricted from freely trade their bonds in the secondary market once they made the agreement.

The timing of the creditor meeting will be dependent on the court’s arrangement, Kaisa said in the statement. Tam added that the company was confident in obtaining enough votes at the court meeting.

Hong Kong and Cayman Islands law requires approval of 75 per cent of shareholders by value when casting votes to implement a restructuring. The approved plan would be applied to all bondholders.

Kaisa Group was the first Chinese developer to default on US dollar bonds

Kaisa Group was the first Chinese developer to default on US dollar bonds, an action triggered after the Shenzhen government blocked Kaisa’s home sales in Shenzhen in late 2014 due to potential business irregularities.

The developer is trying to convert its US$2.5 billion of six offshore dollar and yuan bonds into fresh debt arrangements, including a new coupon rate and maturity date.

To encourage support, it had offered a consent fee ranging from 0.5 to 1 per cent for investors who supported the plan no later than February 7.

Meanwhile, its restructuring plan faces challenges from foreign funds Farallon Capital Management and BFAM Partners, which represent a group of large bondholders holding offshore debt issued by Kaisa.

These investors are asking for a better settlement and have submitted an alternative restructuring proposal to Kaisa. A spokesman for Farallon and BFAM declined to comment.

Last month, Kaisa said it completed its 33.3 billion yuan of onshore debt restructuring and that four projects remain blocked from sale due to asset preservation requirement by creditors.