Kaisa: debt structure as hope for China's real estate market

Kaisa: debt structure as hope for China's real estate market

In recent years, the Chinese real estate industry has experienced serious problems, and the Kaisa Group, an important company in this sector, has recently taken a remarkable step to improve its financial Situation. The company announced on August 20 that it had reached an agreement with a group of creditors in order to push a restructuring of their foreign debt.

The plan is to issue new bonds and changeable debt titles with a total value of $ 9.8 billion. This measure is intended to offer Kaisa long -term stability, after years of financial difficulties. The new bonds have terms that end between 2027 and 2032, with interest rates that range from 5 to 6.25 %. The management describes this restructuring as a necessary step to stabilize your business and thus offers a "runway" for future development.

Details for restructuring

Kaisa has only won a part (a little more than a third) of its creditors for this restructuring process. The company urgently called on its creditors to support the agreement to secure a majority. After a particularly difficult year, this turn for the company was looking for new solutions given a dramatic decline in its share prices, which has fallen by over 98 % since 2017. One reason for the dramatic decline was the use of liquidation applications by some creditors, including the Broad Peak Investment based in Singapore.

This investment company had started legal steps in Hong Kong last year after Kaisa did not take the 750 million dollar for offshore bonds. However, the liquidation lawsuit was withdrawn on March 8 and replaced by another lender, Citicorp. These changes illustrate the initial difficulties with which Kaisa is confronted with, while it is about agreement with the creditors and show the complexity of the current financial situation of the company.

The uncertainty about the future legal situation is reinforced by the upcoming court hearings. A responsible judge had indicated that the negotiations on June 24 may be the last call if no progress was made. As a result, another date for September 9 was agreed, which gives the company the opportunity to either take the necessary measures or to prepare for a possible liquidation process.

The broader challenge in the real estate industry

kaisa is not isolated in her crisis. In fact, the entire industry suffered greatly due to strict credit policy requirements that were introduced by Beijing in 2020. These guidelines aimed to reduce excessive debts among real estate developers, especially for giants such as Evergranden. Evergrand itself faces massive liquidation processes that increase uncertainty on the market. The market for new construction sales also experienced a dramatic decline, with a decline in sales of 24.3 % in 2022 and 8.5 % in 2023.

Kaisa's difficulties that led to the increase in financial burden of around $ 32.7 billion have significantly shaken confidence in Chinese real estate developers. These uncertainties have pointed out how important it is for the Chinese government to actively support the industry, especially to prevent the possibly far -reaching social effects. The support of the state banks and various measures to stabilize the market aim to clarify urgent questions that affect the Chinese economy and thus also the social structures.

A look into the future

The Kaisa strategy is observed closely because it shows how companies act in times of crisis and what measures they take to ensure their financial stability. With the focus on the restructuring and obtaining the consent of your creditors, it remains to be seen how Kaisa will develop in this critical phase. The success or failure of these measures could also serve as a yardstick for other companies in the industry.

Kaisa Group Holdings Limited, founded in 1999, made a name for itself in the Chinese real estate landscape. The company has developed real estate projects in various cities in China, but has been strongly pushed in the headlines in recent years due to financial difficulties. The financial imbalance was reinforced by high debts of almost $ 33 billion, which led the company to a default in 2021 that not only brought Kaisa, but also other larger actors such as Evergrand and Country Garden.

of these credit frames and the associated financial difficulties are not the first challenges with which Kaisa is faced with. Already in 2015, the company was one of the first in China, which was confronted with payment defaults in the offshore bond market. At that time, the combination of excessive growth, financial mismanagement and a stricter regulatory landscape led to Kaisa into a crisis situation. Since then, numerous market participants have ringed the alarm bells that the real estate sector in China is on shaky feet.

market development and regulatory background

In 2020, the Chinese government strengthened its control over the real estate sector by introducing restrictions in the area of debt admission. These measures, known as "three red lines", were designed to limit excessive debt and to promote financial stability. These regulations led to a decline in trading activities and contributed to the liquidity crisis. Financial Times offers a detailed analysis of these political measures.

In addition to the strict financial requirements, Kaisa was affected by a declining real estate market. The sales of new apartments in China fell considerably, which led to an oversupply characterized by a long time. According to reports from 2022, sales decreased by 24.3 %, followed by a further decline of 8.5 % in 2023. These sales figures reflect the growing skepticism of buyers and show how profoundly the trust in the real estate market is shaken.

Current measures for stabilization

The measures that Kaisa has taken to restructure her debts are an attempt to stabilize finances and find long -term solutions. The emission plan, which includes $ 5 billion in new bonds, is to be understood as an attempt to regain the trust of investors and to secure the company's solvency. Kaisa hopes that these new sources of financing will not only bring nostalgia back into the market, but also serve as a means of repaying existing debts.

The role of state banks is also crucial because they have played a key role in recent years to offer financial support in need to offer needy developers. Granting the assurance of loans is part of a broader strategy of the Chinese government in order to stabilize the real estate sector and to promote state -funded projects. According to reports from Bloomberg, these measures have contributed to alleviating some of the most critical problems in the sector, even if the same problems for other companies continue to exist.