(Bloomberg) -- Kaisa Group Holdings Ltd. struck a restructuring deal with a key creditor group with plans for new bonds that may exceed $10 billion, a step that may help the Chinese developer defend itself against a liquidation petition.
Under the terms released Tuesday, Kaisa plans to issue new dollar notes — totaling $5 billion in five tranches and an unspecified amount in another — to partially pay back creditors. The Shenzhen-based company’s restructuring will also include new mandatory convertible bonds — with a total principal amount of $4.8 billion in seven tranches and an unspecified amount in another — that can be swapped for new shares, according to its filing.
The agreement may smooth Kaisa’s path for restructuring and change the dynamics of the parties’ deliberations at a scheduled Hong Kong court hearing next month on whether it should be liquidated.
Once a symbol of the boom years in China’s credit markets, Kaisa was sued last year by creditors to liquidate after a 2021 bond default. The company, carrying $32.7 billion in total liabilities, had been fighting against liquidation efforts since the lawsuit without publicly presenting a restructuring plan.
The new bonds “shall be allocated to each scheme creditor on a pro rata basis,” the company said in the filing, asking other creditors to accede to the terms. It didn’t immediately respond to requests for comment.
Bloomberg Intelligence analyst Hui Yen Tay estimated that the new notes and convertible bonds would total about $13 billion, resulting in a principal haircut of 46% for creditors.
The new notes’ tranches will mature between 2027 and 2032, with coupons ranging from 5% to 6.25%, according to the filing. The conversion price for the debt-to-equity swap portion ranges from HK$4.05 to HK$4.75.
“The contemplated restructuring is intended to provide the company with a long-term runway to stabilize the business,” Kaisa said in the filing.
The company also said it may undertake one or more rights issue, in which its founder and chairman, Kwok Ying Shing, and his brother, Kwok Ying Chi, will participate by contributing 115 million yuan ($16.1 million) in a shareholder loan.
Kaisa’s default was among the first signs of spreading woes in China’s property sector amid the Covid-19 pandemic, as developers’ mounting debt and home-buyers’ speculation led to a string of repayment failures. Kaisa had earlier defaulted on its dollar bonds in 2015, the first ever for any Chinese builder, before recovering.
(Updates with more restructuring details throughout.)
©2024 Bloomberg L.P.