China’s cash-strapped developers hold off defaults through deals with investors, but not out of the woods just yet
- Kaisa reaches an agreement with investors that its wealth management product will pay a 10 per cent instalment on maturity followed by 10 per cent payments every three months
- Aoyuan Group says it has reached a resolution with investors to extend the payment of its 816 million yuan asset support special plan
“This downturn is unlike previous corrections, as it has already contributed to a number of developer defaults,” said Matthew Chow, credit analyst at S&P Global Ratings. The government’s “tightening measures are driving the downturn. Some developers’ inadequate liquidity management and their reliance on hidden debt have compounded market strains, but investors will likely be focused on when easing may happen”.
Kaisa, for instance, said late on Monday that it had reached an agreement with investors and that its wealth management product will pay a 10 per cent instalment to them when it matures. Kaisa will then pay 10 per cent every three months.
This might allow the Shenzhen-based developer to kick the can down the road and assuage angry investors, some of whom besieged its Shenzhen office this month after it missed a payment on a 12.8 billion yuan (US$2 billion) wealth management product sold by Kaisa Finance, a subsidiary.