Chinese developer Kaisa is asking for help as the Fed warns of risks

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

SHANGHAI / BEIJING, November 9 (Reuters) – Kaisa Group Holdings (1638.HK) need help to pay investors, workers and suppliers, the developer told a meeting of a Chinese government think tank, banks and real estate companies, according to a source with direct knowledge of the matter.

China’s real estate sector has been hit by a liquidity pressure, exacerbated by the problems of China Evergrande Group (3333.HK). This has resulted in offshore defaults, credit rating downgrades and divestments of some developer shares and bonds.

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

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

To underscore the liquidity squeeze, Fitch downgraded Kaisa deeper into the default category on Tuesday, citing a worsening liquidity situation, undisclosed debt from asset management products and limited progress in divesting assets.

The developer said it was trying to solve its liquidity problems, advising investors in asset management products on better payment solutions and asking for more respite.

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

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

The think tank makes policy proposals on China’s national development and its economy, but is not a decision-making body.

At the meeting, Shenzhen-based Kaisa urged state-owned enterprises to help private firms improve liquidity through project acquisitions and strategic acquisitions, the source added.

Among the participants in the meeting was 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 measured after sales, told them at the meeting that it was facing significant difficulties amid rating downgrades and banks limiting loans, the source said.

The developer said some financial institutions had transferred funds from their accounts inappropriately, and it urged all lawsuits seeking a freeze on its assets to be heard 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 Government Information Office also did not respond to a request for comment. The source declined to be identified due to the sensitivity of the case.

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

China’s real estate sector problems have kept global markets at the forefront, leading to a number of Beijing officials speaking out in an attempt to reassure investors that the crisis will not get out of control.

UPCOMING DEADLINES

Shares trading in Kaisa, which has sought to sell some of its assets to raise cash, and three of its units were suspended last week, a day after an affiliate missed a payment to onshore investors.

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

Evergrande, the world’s most indebted developer, is struggling with commitments of more than $ 300 billion, which, if not managed, could pose systemic risks to China’s financial system.

Beijing has encouraged government-owned companies and state-owned real estate developers to buy some of Evergrande’s assets, people with knowledge of the case told Reuters earlier.

Some holders of offshore bonds issued by a unit in Evergrande had not received interest payments due on November 6, Monday night in Asia.

Twice in October, Evergrande narrowly averted catastrophic defaults on its $ 19 billion bonds in international capital markets by paying off coupons just before the end of their grace periods.

Such a period expires on Wednesday, November 10, for more than $ 148 million in coupon payments that had been due by October 11th. Evergrande will also make coupon payments totaling more than $ 255 million on its June 2023 and 2025 bonds in December 28.

The share in Evergrande rose as much as 4% on Tuesday.

Evergrande sold $ 52 million worth of shares in HengTen Networks Group on Monday (0136.HK), and has taken its total fundraising from selling down its stake in the Chinese ISP since November 4 to $ 144 million.

Separately, shares in small developer China Aoyuan (3883.HK) jumped over 6 pct.

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

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

Infini said it hopes Aoyuan Healthy will sell the entire company instead of 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; Author: Anne Marie Roantree; Edited by Kim Coghill, Muralikumar Anantharaman and Jan Harvey

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