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Kaisa has been banned or restricted from selling flats at its property projects in Shenzhen by the city's government. Photo: SCMP

Update | Kaisa Group denies reports it is winding up, restructuring

"The company is currently assessing the overall impact on the financial position as a result of the recent developments of the group," co-chairman Sun Yuenan said in a filing to the Hong Kong bourse

Chinese property developer Kaisa Group Holdings Ltd on Wednesday denied media reports that it had passed a resolution in relation to the winding up and restructuring of the group, a day after partners in two projects terminated cooperation deals.

Kaisa said in a statement responding to "certain news articles" that no board meeting had been held on January 6 and it had not passed any resolution to wind up and restructure the company.

Sina.com.cn had reported on Tuesday that Kaisa’s board of directors had approved the winding up and restructuring.

"The company is currently assessing the overall impact on the financial position as a result of the recent developments of the group," co-chairman Sun Yuenan said in a filing to the Hong Kong bourse.

Kaisa will publish an announcement to provide an update as soon as possible, it added.

The statement came a day after Kaisa said partners of two of its urban redevelopment projects in the southern city of Shenzhen planned to terminate cooperation deals and demand a refund of 1.2 billion yuan (US$193 million).

Last week, Kaisa warned it may default on more debt, having failed to repay HSBC a HK$400 million ($51.3 million) loan, the latest developer to flag financial difficulties amid a downturn in China’s real estate sector.

Kaisa had received a notice from the two partners on December 31 about two urban development projects in Shenzhen's Longgang district, the Hong Kong-listed firm announced yesterday without naming the partners.

"The project partners have alleged that the firm has breached the cooperation agreements in relation to the projects and claimed to exercise their rights to terminate the agreements and demand the refund of fees of 1.2 billion yuan paid by the partners under the agreements," it said.

On the same day, Kaisa received a notice from an unnamed lender, an affiliate of the partners, saying the alleged breach of the agreements constituted a default event, the developer said. The lender had demanded immediate repayment of the 1.2 billion yuan of fees plus interest, the company added.

On January 1, Kaisa announced it had defaulted on a HK$400 million loan from HSBC.

Apart from these two cases, the developer said it had not received any demand for repayment from other creditors.

As at Monday, debt liabilities of 797.2 million yuan became due and payable upon maturity of their term, Kaisa said.

"The company is assessing the impact on the financial position of the company and the repayment obligations of the company," it said.

Standard & Poor's lowered its credit rating for Kaisa on Monday from BB-minus to SD, meaning the company had defaulted on at least one of its debts, while Moody's Investors Service downgraded its rating for the developer from B3 to Caa3, indicating poor quality with very high credit risk. Moody's warned it could further downgrade Kaisa if the company defaulted on other debts.

"We downgraded Kaisa because the company has defaulted on a HK$400 million offshore term loan," S&P credit analyst Dennis Lee said. "This is an event of default and could cause an acceleration of debt repayment on all its other debt. Kaisa's other debt instruments have cross-default clauses."

Haitong Securities said in a recent report that "adding fuel to the fire may trigger cross-default of bonds valued at HK$17 billion".

"We reiterate our sell rating to reflect its escalating liquidity and corporate governance risk," Haitong said. "The company is struggling in turmoil, triggered by project sales blockage by authorities in Shenzhen."

Kaisa has been banned from selling flats at four of its property projects in Shenzhen, where the company is headquartered, by the city's government.

The Shenzhen government had also imposed restrictions on all of the company's remaining projects in the city, Haitong said.

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