Chinese developer Kaisa asks for help as Fed warns of risks

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

  • Kaisa asks for help paying investors, workers and suppliers – source
  • Developer meets with 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 think tank meeting of the Chinese government, banks and real estate companies, according to a source with direct knowledge of the matter.

The Chinese real estate sector has been hit by a tightening of liquidity, exacerbated by the problems of the China Evergrande group (3333.HK). This has resulted in overseas defaults, credit rating downgrades, and massive sales of stocks and bonds by some promoters.

The U.S. Federal Reserve said on Monday that tensions in China’s real estate sector, caused in part by a regulatory focus on indebted companies, as well as a sharp tightening in global financial conditions, could pose risks to the U.S. financial system.

“Given the size of the Chinese economy and financial system … financial strains in China could strain global financial markets through worsening risk sentiment, pose risks to global economic growth and affect the United States, “he said in his latest financial stability report.

Highlighting the liquidity crunch, Fitch lowered Kaisa deeper into the defaults category on Tuesday, citing a deteriorating liquidity situation, undisclosed debt from wealth management products and limited progress in asset disposals.

The developer said he was trying to resolve his liquidity issues, was consulting investors in wealth management products on better payment solutions, and pleaded for more breathing space.

“We sincerely ask investors to give the Kaisa group more time and patience,” he said Monday evening in a statement on his official WeChat account.

Kaisa attended a meeting with the State Council’s Development Research Center on Monday, other developers and lenders in southern China’s Shenzhen city, the source said.

The think tank makes policy proposals on China’s national development and economy, 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 acquisitions and strategic purchases, the source added.

Meeting attendees 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, according to the source. .

Kaisa, China’s 25th largest developer in terms of sales, told meeting attendees that he was facing significant challenges due to credit downgrades and bank lending cuts, the source said.

The developer said some financial institutions improperly transferred funds from his accounts and he urged all prosecutions aimed at freezing his assets to be handled centrally by a court in Shenzhen, the source added.

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

The State Council’s Information Office also did not respond to a request for comment. The source declined to be identified due to the sensitivity of the case.

Problems in China’s real estate sector have held global markets in suspense and prompted a series of Beijing officials to speak out in an attempt to reassure investors that the crisis will not get out of hand. Read more

COMING DEADLINES

Trading in shares of Kaisa, which was looking to sell some of its assets to raise funds, and three of its units was suspended last week, a day after an affiliate missed a payment to onshore investors. Read more

Kaisa has the most offshore debt of all Chinese developers after Evergrande.

Evergrande, the world’s most indebted developer, is grappling with over $ 300 billion in liabilities, which, if left unmanaged, could pose systemic risks to China’s financial system.

Beijing has pressured state-owned companies and state-backed real estate developers to buy some of Evergrande’s assets, people with knowledge of the matter told Reuters. Read more

Some holders of offshore bonds issued by an Evergrande unit had not received the interest payments due on November 6 Monday evening in Asia. Read more

Twice in October, Evergrande narrowly avoided catastrophic defaults on its $ 19 billion bonds in international financial markets by paying coupons just before their grace periods expired.

One of those periods expires on Wednesday, November 10 for more than $ 148 million in coupon payments that were due on October 11. Evergrande is also due to make coupon payments totaling more than $ 255 million on its June 2023 and December 2025 bonds. 28.

Evergrande shares rose 4% on Tuesday.

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

Separately, shares of small developer China Aoyuan (3883.HK) jumped more than 6%.

Infini Capital told Reuters on Tuesday that it had accumulated shares of China Aoyuan’s property management unit, Aoyuan Healthy Life Group (3662.HK), continuously over the past few weeks to become its second shareholder.

Aoyuan Healthy said last week that it was in preliminary discussions with several independent third parties regarding the possible divestiture of a stake in certain units.

Infini said he hopes Aoyuan Healthy sells the entire business rather than its assets.

($ 1 = 7.7840 Hong Kong dollars)

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

Our standards: Thomson Reuters Trust Principles.


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