Kaisa Deadline Nears; Chu Has a New Role: Evergrande Update

(Bloomberg) -- One of China’s largest issuers of junk dollar debt will announce Thursday whether creditors agreed to a debt swap designed to avert default. 

Kaisa Group Holdings Ltd., which became the first Chinese developer to default on such bonds in 2015, is trying to stave off another collapse that could come as soon as next week. The company’s offer to exchange its $400 million of dollar notes maturing Dec. 7 for new ones due 18 months later expires at 4 p.m. London time.

Kaisa shares were little changed, while its bonds were indicated about 1 cent on the dollar higher, according to Bloomberg-compiled prices. Meanwhile, China Evergrande Group’s listed units sank amid heavy volume in Hong Kong trading. Shares of its electric-vehicle business lost almost a fifth of their value within minutes. 

Key Developments:

• Kaisa Abandons Hong Kong Developments in Race to Avoid Default
• Worst May Be Over for China Junk Bonds, But Not Out of Woods Yet
• China’s Li Urges Crackdown on Late Payments to Small Businesses
• China Private Builders’ Yuan Bond Sales Hit Lowest in Five Years
• China Home Sales Slump Deepens as Easing Shows Little Effect
• Arkkan Raises $245 Million for China Real Estate Recovery Fund
• China’s Developers Face $12 Billion in Trust Payments This Month

Tycoon’s New Banker Is the ‘Queen of Shell Companies’ (2:45 p.m. NY)

She’s best known as the “queen of shell companies,” a financier who briefly became Hong Kong’s richest woman by striking deals in some of the wildest corners of the city’s stock market.

Now Pollyanna Chu has a new role: investment banker for embattled China Evergrande Group billionaire Hui Ka Yan. Chu’s Kingston Securities was the sole manager of two share sales last month by Evergrande’s electric-vehicle unit, helping the company raise more than $400 million despite a liquidity crisis that drove down its stock 90% this year. 

Some Kaisa Investors Yet to Get Dollar Bond Coupon (5:22 p.m.) 

Kaisa Group Holdings Ltd. has yet to pay interest due Wednesday on a dollar bond, two noteholders said, in the latest sign of stress facing the Chinese property developer. 

The Shenzhen-based firm had to pay $17.5 million for the coupon payment on a $300 million note due 2026, according to data compiled by Bloomberg. There’s a 30-day grace period for the interest payment before a default can be declared. 

Moody’s Cuts China Property Sales View (5:16 p.m. HK) 

Moody’s now forecasts contracted property sales will fall 5%-10% next year in China, versus a prior view of flat to down 5%, as “restrictions on developers’ funding access are limiting” marketing and construction abilities.

“Funding access will remain tight during the next 6-12 months due to tightened regulations and increased risk aversion” amid Evergrande’s woes and defaults in the sector, analysts including Kelly Chen wrote in a report dated Wednesday.

Onshore Bond Sales (3:18 p.m. HK)

The onshore unit of state-controlled China Overseas Land & Investment Ltd. is planning to sell 10 billion yuan ($1.6 billion) worth of bonds in the interbank market, according to documents filed to the Debt Capital Market Filing Analysis Notification System. Country Garden is seeking to sell as much as 5 billion yuan of notes, while a Longfor Group Holdings Ltd. unit is planning two deals that may be worth a combined 4 billion yuan.

Developer Asks Employees to Take Leave (3:15 p.m. HK)

A local unit of Chinese property developer China South City Holdings Ltd. has asked some employees to take more than four months of leave, China Business News reported, citing a company document. The employees will be paid only 60% of the local minimum salary during that time, the report said.

Aoyuan Proposes WMP Repayment Plans (1:07 p.m. HK)

China Aoyuan Group Ltd. proposed repayment plans for about 6 billion yuan of outstanding wealth management products, Chinese media outlet Yicai reported, without saying where it got the information. Solutions included cash installments or repaying with physical assets such as residential units and car parking spaces.

Guangzhou R&F Coupon in Focus (12:37 p.m. HK)

Some of Guangzhou R&F Properties Co.’s dollar bonds fell for a seventh day, on pace for record lows. The developer is due to pay a 263.2 million yuan coupon by Saturday on a 4 billion yuan local note. 

Evergrande NEV Sinks (11:11 a.m. HK)

China Evergrande New Energy Vehicle Group Ltd. fell as much as 22% in Hong Kong, the most in more than two months. Multiple trades comprising 100,000 to 200,000 shares were recorded shortly before 11 a.m. local time. Another unit of the builder, Evergrande Property Services Group Ltd. dropped as much as 6.8% to a fresh record low. HengTen Networks Group Ltd., which Evergrande agreed to dispose its remaining 18% stake of last month, declined 9.3%. 

Late Payments Crackdown (9:56 a.m. HK)

China’s government vowed to address the problem of an increase in overdue payments to small businesses in a State Council meeting chaired by Premier Li Keqiang Wednesday. 

Small and medium-sized companies’ account receivables have increased rapidly and there have been more incidents of delayed payment this year due to sporadic virus outbreaks and the complex environment both domestically and internationally, the meeting of China’s cabinet said.

Seazen Sinks After Rights Issue (9:37 a.m. HK)

Seazen Group Ltd.’s shares dropped as much as 7.3% in their trading resumption after the developer announced plans to issue as many as 296.2 million rights shares. The offer price represented a 5.6% discount to the theoretical ex-rights price, based on Wednesday’s closing price. 

The proceeds are slated be used as additional capital reserve to capture business opportunities in China and for general corporate purposes, the company said in an exchange filing.

Kaisa to Meet Bondholders (8:59 a.m. HK)

Kaisa will meet its offshore bondholders and discuss ways of repaying its loans, the South China Morning Post reported, citing unidentified people. Options presented by some bondholders include an offer to buy new bonds by Kaisa that could be exchanged with equity in some of the developer’s listed units.

The debt exchange offer expiring Thursday requires a 95% approval rate. Kaisa has said it may not be able to repay bonds and could consider a debt restructuring if it fails to win support. The firm has some $11.6 billion in dollar debt outstanding. That means a potential default risks spurring selling in the broader high yield market.  

PBOC to Keep Steady Funding Conditions (7:58 a.m. HK)

China’s central bank will keep funding conditions steady as the year-end approaches, according to a report in the China Securities Journal which cited market experts. The People’s Bank of China is likely to roll over the medium-term lending facility in December, the report said.

A 950 billion yuan maturity in December is a consequence of action taken last year to calm financial markets following a series of defaults by state-owned companies. Click here for a table showing the net position of cash liquidity of People’s Bank of China.

CST Sells Evergrande Bonds (10:48 p.m. HK)

CST Group Ltd. said one of its units has disposed of China Evergrande Group notes in the secondary market. The Hong Kong-based investment group said it will to record a loss of about $21.6 million for the financial year ending March 2022 as a result of the disposals.

A look at Evergrande’s maturity schedule:

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