Chinese developer Kaisa asks for help as the Fed warns of risks

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A picture shows the Kaisa Plaza of Kaisa Group Holdings Ltd on a hazy day in Beijing, China, November 5, 2021. REUTERS / Thomas Peter

  • Kaisa asks for help with paying investors, workers, suppliers – source
  • Developer met Chinese government think tank in Shenzhen – source
  • News comes amid growing concerns over China’s real estate sector
  • Fitch downgrades Kaisa, citing deteriorating liquidity

SHANGHAI / BEIJING, Nov. 9 (Reuters) – Kaisa Group Holdings (1638.HK) needs help paying investors, workers and suppliers, the developer said at a meeting of a Chinese government think tank, banks and suppliers, according to a source Real estate companies with direct knowledge of the matter.

China’s real estate sector has been hit by a liquidity squeeze exacerbated by the problems facing China Evergrande Group (3333.HK). This has resulted in offshore defaults, credit downgrades, and sell-offs in some developers’ stocks and bonds.

The US Federal Reserve said Monday that stress in China’s real estate sector, caused in part by a regulatory focus on debt-laden companies, as well as a sharp tightening in global financial conditions could pose some risks to the US financial system.

“Given the size of China’s economy and financial system … financial pressures in China could weigh on global financial markets by worsening risk sentiment, pose risks to global economic growth, and adversely affect the United States,” said its latest report on financial stability.

Underlining the liquidity crisis, Fitch downgraded Kaisa lower to default on Tuesday, citing a deteriorating liquidity situation, undisclosed debt from wealth management products and limited progress in selling assets.

The developer said it was trying to resolve its liquidity problems, advising wealth management product investors on better payment solutions, and pleading for more breathing space.

“We sincerely ask investors to give Kaisa Group more time and patience,” said a statement on their official WeChat account late Monday.

Kaisa attended a meeting with the State Council’s development research center, fellow developers and lenders in the southern Chinese city of Shenzhen earlier on Monday, the source said.

The think tank makes political proposals on the national development and economy of China, but is not a decision-making body.

At the meeting, Shenzhen-based Kaisa urged state-owned companies to help private companies improve their liquidity through project takeovers and strategic purchases, the source added.

Participants in the meeting included China Vanke (000002.SZ), Ping An Bank (000001.SZ), China Citic Bank, China Construction Bank (601939.SS), CR Trust, Southern Asset Management and Developer Excellence Group, the source said .

Kaisa, China’s 25th largest developer by revenue, told attendees at the meeting it was facing significant difficulties due to rating downgrades and banks tightening credit, the source said.

The developer said that some financial institutions had inappropriately transferred funds from its accounts and requested all lawsuits demanding a freeze on its assets to be handled centrally in a court in Shenzhen, the source added.

Kaisa, Vanke and Citic Bank declined to comment. Excellence and the other banks participating in the meeting did not immediately respond to requests for comment.

The State Council Information Office did not respond to a request for comment either. The source did not want to be identified due to the sensitivity of the matter.

China’s problems in the real estate sector have kept global markets in suspense, leading a number of Beijing officials to speak out to reassure investors that the crisis will not spiral out of control. Continue reading

IMMEDIATE DEADLINES

Trading in shares of Kaisa, which wanted to sell some of its assets to raise cash, and three of its units was suspended last week, a day after a subsidiary missed a payment to onshore investors. Continue reading

Kaisa has the most offshore debt of any Chinese developer after Evergrande.

Evergrande, the world’s most indebted developer, is grappling with more than $ 300 billion in debt that, if not managed, could pose systemic risks to China’s financial system.

Beijing has urged state firms and government-backed real estate developers to buy some of Evergrande’s assets, people knowledgeable about the matter previously told Reuters. Continue reading

Some offshore bondholders issued by an Evergrande entity had not received interest payments due November 6th in Asia by Monday evening. Continue reading

Twice in October, Evergrande saw catastrophic defaults on its $ 19 billion bonds.

Such a deadline runs on Wednesday, November 10th for coupon payments of more than 28 148 million.

Evergrande’s shares rose up to 4% on Tuesday.

Evergrande on Monday sold $ 52 million worth of shares in HengTen Networks Group (0136.HK), increasing its total fundraising from the sale of its stake in the Chinese internet service provider to $ 144 million since Nov. 4 .

Regardless, the shares of small developer China Aoyuan (3883.HK) rose over 6%.

Infini Capital told Reuters on Tuesday that it has continuously amassed shares in China Aoyuan’s real estate management unit, Aoyuan Healthy Life Group (3662.HK), over the past few weeks, to become its second largest shareholder.

Aoyuan Healthy said last week it was in preliminary discussions with several independent third parties about the possible divestment of stake in certain entities.

Infini hopes Aoyuan Healthy will sell the entire company, not its assets.

($ 1 = 7.7840 Hong Kong dollars)

Reporting By Samuel Shen, Cheng Leng, and Tony Munroe; Additional coverage from Joy Leung and Clare Jim in Hong Kong; Letter from Anne Marie Roantree; Editing by Kim Coghill, Muralikumar Anantharaman and Jan Harvey

Our standards: The Thomson Reuters Trust Principles.


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