Kaisa Debt Swap Offer; Discount Stock Sale: Evergrande Update

(Bloomberg) — Kaisa Group Holdings Ltd. offered to exchange at least $380 million in bonds for new notes maturing in 2023 in a bid to avert default, while the Chinese city of Chengdu rolled out measures to support the property sector. An unidentified China Evergrande Group shareholder raised about HK$669 million ($86 million) via a share placement at a steep discount.

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Kaisa’s 2021 bond fell after the debt swap offer, while its shares jumped 15% in Hong Kong after a three-week suspension. Concerns about Kaisa’s proposed exchange sent China’s high-yield dollar bonds down as much as 2 cents on the dollar Thursday, according to credit traders. Property shares rose on the Chengdu move.

Chinese state-owned real estate firms have sold a monthly record 64 billion yuan ($10 billion) of local bonds in November, according to Bloomberg-compiled data, as the nation’s private developers have been scrambling to alleviate their financing stress.

Key Developments:

  • Lying Flat Can Be a Winning Investment Strategy Too: Shuli Ren

  • Kaisa Bond Slide Says Offer May Not Solve Problem: Credit React

  • Kaisa’s Latest Saga Raises Red Flags for China Property Bonds

  • Digital Yuan a Game Changer to Curb China Property Speculation

  • China SOE, Private Developers’ Divergence to Persist: StanChart

  • Volatility Brings Entry Point for Asia USD Junk Bonds: T. Rowe

  • Kaisa to Sell H.K. Site to Far East Consortium and New World JV

  • China Urges Local Governments to Spend More to Counter Slump

Analysts See Value in Asia Junk Bonds From China Support (2 p.m. HK)

A growing chorus of analysts is betting on a reversal in fortunes for Asian junk dollar bonds next year amid signs that Chinese authorities may relax restrictions on the property sector.

Asian speculative-grade debt could return about 10% next year, according to UBS Group AG strategists including Matthew Mish, who wrote in a report this week that view is essentially a call on Chinese developers. Asian junk is the firm’s top global credit pick for 2022 amid expectations of additional easing measures in China’s property sector, though not a complete policy U-turn. The view is shared by others including strategists at Bloomberg Intelligence.

Evergrande Block Trades Show Holder Sells at Discount (11:30 a.m. HK)

A flurry of large trades in China Evergrande Group Thursday suggested a large institutional holder agreed to a 20% discount to offload the stock.

Seven block trades — totaling 300 million shares — crossed before the open of regular cash trading in Hong Kong. The orders were all priced at HK$2.23 apiece, indicating they were part of the same block agreement. That compares with Wednesday’s closing price of HK$2.78.

Trading in Evergrande and related companies has been particularly active this week for no obvious reason, spurring speculation that founder Hui Ka Yan may tap the stock market for funds. The sale may have come from the 2.8 billion share pool that appeared in Hong Kong’s clearing system last week, widely thought to belong to Hui or his wife. It could also come from long-time backer Chinese Estates Holdings Ltd., which held 313.2 million shares after selling down its stake in recent weeks.

Millions of Evergrande shares changed hands in Hong Kong’s clearing system on Wednesday. Haitong International Securities Group Ltd.’s position was trimmed to 2.1 billion shares, down from 3.3 billion shares the previous day. Seekers Markets Ltd., which added 900 million Evergrande shares to its holdings, reported the equivalent of a 6.8% stake.

Kaisa Resumes Trading, Offers Debt Swap (7:50 a.m. HK)

Kaisa Group began an exchange offer for at least $380 million of bonds to avert a default during the nation’s real estate cash crunch.

The builder has offered to exchange at least 95% of its $400 million 6.5% note maturing Dec. 7 for new notes with the same coupon maturing June 2023. If the offer to bondholders fails, the developer may not be able to repay bonds and could consider a debt restructuring, it said in a stock exchange filing on Thursday.

The firm’s 6.5% 2021 note dropped 5.2 cents on the dollar to 45.3 cents, on track for the biggest fall since Nov. 8, according to Bloomberg-compiled prices as of 9:50 a.m. in Hong Kong.

Chengdu Rolls Out Measures to Support Developers (7:40 a.m. HK)

A Chinese city rolled out a series of easing measures to boost liquidity at property developers, becoming the first major local government to address a cash crunch engulfing the real estate industry.

Chengdu, the capital of the southwestern province of Sichuan with a population of about 21 million, will accelerate approvals for home sales and property loans as well as ease restrictions on using proceeds from pre-sales, according to a statement by the local housing authority late Wednesday.

Fantasia to Modify Payment of Interest for 2023 Bonds (7:30 a.m. HK)

Fantasia said the company has made arrangement for the payment on Nov. 25 for 7.50% yuan-denominated bonds due 2023, according to a revised schedule. The firm plans to pay 20% of the interest on Nov. 25 and 80% on Nov. 25, 2022.

Chinese Estates Reduces Evergrande Stake

Chinese Estates Holdings Ltd., a long-time supporter of China Evergrande Group, has further cut its stake in the embattled property developer.

The Hong Kong firm, led by Chief Executive Officer Chan Hoi-wan, sold about 270 million Evergrande shares since its last disclosure on Oct. 6, lowering its stake to 2.36% as of Friday, according to a company filing late Tuesday. It revised its expected loss if it got rid of all of its holding to HK$10.6 billion ($1.4 billion) from HK$10.4 billion last month.

Chinese Estates and Chan spent years helping Hui Ka Yan raise cash for his empire and at one point had an Evergrande stake of almost 9%. But as the developer’s woes worsened, Hui’s backers began heading for the exit and started offloading their holdings in August. Since then, the Hong Kong firm offered to go private after its shares slumped as much as 51% in about seven months.

A look at Evergrande’s maturity schedule:

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