NewForeign creditors reject Kaisa plan to restructure debt

A law firm representing offshore creditors of Kaisa Group Holdings yesterday rejected the embattled mainland developer's proposal to extend its debt by five years and slash coupon rates by up to 66 per cent.

It is not known how many creditors are represented by Kirkland & Ellis.

Kaisa needed holders of 50 per cent of five high-yield notes and 66 per cent of a convertible bond to back its proposal by yesterday. Creditors were widely expected to reject the restructuring plan.

Kaisa has US$2.5 billion in offshore debt and US$7.6 billion in domestic debt.

Analysts said the next step was to renegotiate the terms as debt holders believed Kaisa's assets were still valuable, although the crisis was short-term liquidity.

The risk is if they push back too much, Sunac China Holdings, which has conditionally agreed to acquire Kaisa, may walk away from the deal. In that case, Kaisa's cash flow and viability will come under further strain.

Offshore bond holders could not enforce rights on onshore assets, said Peter Churchouse, a veteran in the city's property sector. "That means they risk being treated worse than equity holders in the capital structure," he said.