Kaisa Group Holdings Ltd is offloading more assets to alleviate a liquidity crunch as the Chinese developer struggles with deepening debt woes and an imminent default risk.
Hong Kong-listed Kaisa sold the 38th floor of The Center, one of Hong Kong’s tallest skyscrapers in the city’s central business district, for HK$750 million ($96.2 million) to China Shandong Hi-Speed Financial Group to settle part of an outstanding loan, Shandong Hi-Speed said in a filing over the weekend.
After deducting the outstanding principal and interest of the property’s bank financing, the final transaction amount was HK$186 million. The funds will be used to offset Kaisa’s unpaid debts to Shandong Hi-Speed Financial, according to the filing.
A group of Kaisa’s creditors late Monday sent the company a formal forbearance proposal to help it narrowly avoid a formal default, Bloomberg reported. The offer would give Kaisa more time to seek potential solutions, the report said.
With some $11.6 billion outstanding, Kaisa is China’s third-largest issuer of dollar notes among property companies, Bloomberg data showed.
Shandong Hi-Speed Financial said its decision to acquire Kaisa’s Hong Kong property was made taking into account factors including Kaisa’s financial status and repayment ability, the property’s value and its investment potential.
In addition to offsetting part of previous loans, Shandong Hi-Speed Financial also agreed to extend the maturity of some existing loans to Kaisa with higher interest rates.
According to public records, Shandong Hi-Speed Financial issued a $125 million loan to a Kaisa subsidiary under Kaisa’s guarantee.
In October this year, Kaisa raised an additional $120 million from Shandong Hi-Speed Financial by issuing a note and pledged as collateral 67.18% of its Hong Kong-traded property management unit Kaisa Prosperity.
Backed by the Shandong government in eastern China, Shandong Hi-Speed Financial engages in financial leasing, equity investment, credit services and asset management.
Kaisa reportedly bought the 38th floor of The Center in April for HK$870 million, meaning a HK$120 million net loss on the sale. Kaisa didn’t comment on the matter.
Kaisa still owns the 30th floor of the building as its main office site in Hong Kong.
The financial woes of Kaisa came under the spotlight after the company abruptly canceled meetings with investors in October, sending its dollar bonds lower. Subsequent downgrades by global credit rating companies caused a further sell-off of the developer’s shares. In November, Kaisa missed payments on wealth management products it guaranteed, fueling greater concerns over its liquidity.
Kaisa has since stepped up asset sales to raise capital. On Nov. 25, Kaisa sold its stake in a Hong Kong residential project to raise HK$950 million. It sold another project in Hong Kong in late November, bringing in HK$900 million, Caixin learned.
This article was first published on Caixin Global.