Chinese real estate unit Kaisa defaults on debt, liquidity fears worsen

The Chinese construction group Kaisa reported that its financial unit failed to pay a wealth management coupon (WMP), an announcement that exacerbates concerns about a liquidity crisis at the real estate company that also faces a heavy debt burden.

The Shenzhen-based group, which provides collateral for the coupon, said in a statement that it faces unprecedented liquidity pressure due to a challenging housing market and downgrades from rating agencies.

Kaisa Holdings Ltd said it was actively raising funds to ease the pressure, through measures including accelerating asset sales.

Kaisa has the most offshore debt maturing in 2022 of any real estate group in China, after the giant Evergrande Group began to reel in its more than $ 300 billion in liabilities.

Kaisa’s woes come amid concerns about a deepening liquidity crisis in China’s real estate segment, with a series of overseas debt defaults, credit-rating downgrades, and stock and bond liquidations. of construction companies in recent weeks.

The worsening of a segment that accounts for $ 5 billion for China, a key engine of economic growth, is testing Beijing’s determination to push through painful structural reforms, such as reducing high debt levels.

Shenzhen regulators will meet on Friday to discuss liquidity problems at Kaisa and its counterpart Fantasia, local media Cailianshe reported. Fantasia defaulted on a tranche of bonds abroad last month. Fantasia and Kaisa declined to comment.

Kaisa’s board of directors, including the group’s chairman Kwok Ying Ching, spoke with WMP investors at a meeting on Thursday, according to the realtor’s statement, to discuss payment solutions.

Two investors told Reuters that Kaisa said during the meeting that she has an outstanding total of 12.79 billion yuan in principal and interest, and that she plans to pay them back gradually. But investors have rejected these plans, they claimed.

Kaisa has about $ 3.2 billion in senior notes abroad due in the next 12 months, with an upcoming maturity of $ 400 million on December 7. In addition, it must assume coupons totaling more than US $ 59,000 million, due on November 11 and 12.