Kaisa Group Is Said to Discuss Dollar-Bond Sale With Banks

(Bloomberg) -- Chinese property developer Kaisa Group Holdings is in talks with banks in relation to a dollar-denominated bond issuance, according to people familiar with the matter who are not authorized to speak publicly and asked not to be identified.

The firm’s new funding plan comes amid a sharp drop in junk bond yields that has propelled new bond sales among high yield issuers in the region, particularly Chinese property developers as they look to refinance debt. Two phone calls to Kaisa’s media department went unanswered.

A potential dollar bond sale by Kaisa would be its second offshore issuance since it completed a restructuring following a landmark dollar-bond default in 2015. Kaisa sold $3.45 billion of notes in June last year to replace the securities it issued to repay creditors in that restructuring to extend its debt maturity profile.

Chinese builders have sold $16 billion of dollar bonds this year through April 17, a 45 percent jump from the year-earlier period, according to Bloomberg-compiled data.

“Chinese property developers -- including Kaisa -- are looking for opportunities to come to the offshore bond market as they bought a lot of land last year and some of the land premium hasn’t been paid yet,” Yin Chin Cheong, an analyst at CreditSights in Singapore. “Also they are trying to prefund in the dollar bond market ahead of rate hikes later this year.”

Kaisa’s existing notes dropped on the news of potential new supply coming to the market. Its 9.375 percent 2024 notes fell 1.6 cents on the dollar to 91 cents at 1:44 p.m. in Hong Kong, its biggest drop on record, according to Bloomberg-compiled prices.

READ: JPMorgan Warns of Losses Amid Torrent of China Property Bonds

Kaisa Group became the first Chinese developer to default on dollar bonds in 2015 after the firm was involved in a regulatory probe its home city Shenzhen. Creditors led by Farallon Capital Management LLC and BFAM Partners supported its debt restructuring in March 2016.

The developer’s businesses normalized after the reorganization, aided by a surge in home prices in Shenzhen. It recorded net income of 3.28 billion yuan ($522 million) in 2017, compared with a loss of 612.4 million yuan a year earlier. Its Hong Kong-listed shares have almost tripled in value since they resumed trading in March last year.

©2018 Bloomberg L.P.