Kaisa Group on debt restructuring with Citic Bank, sources say

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What’s new: Fancy Chinese developer Kaisa Group Holdings Ltd. completed a debt restructuring with the lender China Citic Bank Corp.Caixin learned from several independent sources.

Citic Bank was a long-term creditor to Kaisa and helped bail out the company from a previous crisis. In 2015, Citic Bank lent Kaisa 30 billion yuan ($4.5 billion) along with trust companies after a local government in Shenzhen blocked the company’s real estate sales amid anti-corruption investigations.

Under the bailout loans, 20 billion yuan was swapped into debt in nine Kaisa projects. Because commercial banks are not allowed to invest directly in real estate that is not for their own use, Citic Bank has had to re-pool the Kaisa project’s debt and entrust trust companies to hold the equity in the projects, a person close to Kaisa said.

In the past two weeks, Kaisa transferred stakes in several Shenzhen projects to a special purpose vehicle newly established by Kaisa and Citic Bank, a person close to the matter told Caixin. After the transfer, the projects will be majority owned by Western Trust Co. Ltd. be, but the actual shares belong to Citic Bank, the person said.

As part of the deal, Citic Bank agreed to roll over old debt and provide new funds to ensure completion of underlying projects, the person said.

The background: Kaisa is among a number of major real estate developers in China facing cash constraints, including China Evergrande Group, whose precarious conditions are rocking global bond markets. Known as China’s first developer to default on dollar debt in 2015, Kaisa has been referred to as a delinquent again after failing to repay a $400 million bond maturing Dec. 7.

According to the company’s financial report, as of the end of June 2021, Kaisa had total assets of 319.1 billion yuan and liabilities of 237.7 billion yuan. But like most Chinese developers, Kaisa has large off-balance sheet liabilities that are difficult to estimate.

Kaisa has increased asset sales to raise capital. The company put up 18 properties in Shenzhen for sale, mainly urban renewal projects, with a total value of 81.8 billion yuan. The list expanded to 25 projects in November, but no deals were struck.

Quick Takes are condensed versions of China-related quick news stories for you to use. Click here to read the full story in Chinese here.

Contact reporter Denise Jia ([email protected]) and editor Bob Simison ([email protected])

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