Kaisa woes force peers to seek expensive financing

Mainland developers are having to turn to more expensive sources of finance as problems at Kaisa Group Holdings make it increasingly difficult for them to get credit in the offshore market.

Kaisa's failure this month to make an interest payment on a US dollar bond has left investors worried about whether other developers can service their debt.

January is usually a busy month for developers to raise funds offshore. However, no high-yield bonds or syndication loans from the mainland's property companies have been seen so far due to a reluctance from investors and lenders to take on more of this debt until they see what happens to Kaisa.

Officials at four property developers in the private sector said they were trying instead to get loans in the onshore market, a route that comes with higher interest rates. They are also considering project finance, where investors finance a specific development project through a combination of debt and equity.

"We … may resort to equity financing if we have to," said a member of the corporate finance team at a listed developer based in eastern China.

Local government officials blocking real estate sales and anti-corruption probes are adding to worries about the prospects of companies in the mainland's already highly leveraged property industry.