Chinese developer Kaisa suspends share trading as potential default looms

Kaisa, the second biggest international borrower in China’s real estate sector after Evergrande, suspended trading of its shares on Wednesday, a day after a $400m bond matured without any sign of payment to investors.

Kaisa said the shares were suspended “pending the release by the company of an announcement”, according to a Hong Kong stock exchange filing.

The decision comes as troubles at the company and Evergrande have stoked concerns over the health of China’s vast property industry, which accounts for about a third of the country’s economic output. Kaisa and Evergrande, which has total liabilities of more than $300bn, could default this week.

Members of a Kaisa bondholder group were unclear whether they would receive the proceeds of the bond which matured yesterday, according to a person familiar with the matter.

Kaisa has close to $3bn coming due in the next year. But investors rejected an offer from the company last week to extend the maturity of its debt to avoid default. The company on Monday sent another offer of forbearance to the company to delay its debt repayments.

The company, which pleaded for “patience” after missing payments on wealth management products in mainland China in November, was the first of the country’s developers to default on international debt in 2015.

S&P withdrew its credit ratings on the company last month and said it believed “the China-based property developer may not be able to service its debt in time, which may result in a debt restructuring”.

Separately, investors in Evergrande bonds said yesterday they had not received interest payments due by the end of Monday, pushing the company closer to a formal default which S&P believes is “inevitable”. 

Evergrande, which has yet to make any public announcement regarding the payments, has missed multiple interest payments on its international bonds since September but transferred the money before 30-day grace periods ended.

Its challenges have spread across the industry, where a number of smaller developers have also defaulted.

The world’s most indebted developer said on Friday in a filing, which referred to guarantees on $260m of debt, that it would “actively engage” with creditors to “formulate a viable restructuring plan”.

The crisis in China’s real estate sector has pushed yields on indices of the country’s high yield borrowers to their highest level since the financial crisis.

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