New | Default of Shenzhen developer Kaisa offers lessons in the perils of China
Developer's financial woes promise a poor outcome for creditors and overseas investors, though many of the risks were easy to see in advance
The apparent default of leading property developer Kaisa Group shows clearly just how badly global investors are at pricing China risks.
Shenzhen-based Kaisa said on Monday it had missed interest payments to investors in its offshore dollar bonds, that many of its bank accounts had been frozen and that a mainland China court had frozen more than US$100 million of assets of one of its units.
Kaisa's founder and chairman left the company in December, triggering an acceleration of repayment of a loan made by HSBC, which the company first missed but was then granted a temporary waiver.
Kaisa's chief financial officer has since left.
The company, which had been well regarded, began its dizzying descent late last year, when officials in Shenzhen began to block sales at its properties, as well as routine applications for licences and permits. This raises the possibility that the roots of its woes are at least in part political.
Kaisa's actual condition is obscure, as are the underlying causes, but while all signs point to a very poor outcome for its investors and creditors, many of the risks were easy to see in advance.