China developer Kaisa says bondholder debt recast plan not viable

20 Jan, 2016

By Clare Jim & Umesh Desai

Chinese property developer Kaisa Group said on Thursday a debt restructuring plan proposed last week by bondholders including Farallon Capital and BFAM Partners was "not commercially viable in the current environment".

The heavily indebted Shenzhen-based company said in a statement that the debt restructuring proposal it offered to offshore creditors in late December is in the best interest of the company and it is supported by the board and the market.

Kaisa confirmed the alternative plan was proposed by the two funds on Jan. 14.

Kaisa bonds have been slowly slipping since the start of the year, with uncertainty looming about the debt restructuring outcome. Its bonds due 2018 have lost 2-3 points and now trade at around 65/67 cents on the dollar.

It's unclear whether Farallon and BFAM have enough support from other bondholders to block Kaisa's proposed restructuring.

"The alternative proposal is betting on (Kaisa chairman Ying Shing) Kwok's willingness and ability to put in more capital," said a note from research firm Lucror Analytics.

"If Kwok is not agreeable or Farallon blocks the original deal, the bonds may drop further. We think Kaisa may sweeten its original plan."