Home Short payment terms Evergrande and Kaisa defaulted by Fitch after missed pay deadlines

Evergrande and Kaisa defaulted by Fitch after missed pay deadlines

0


  • Cross-faults triggered for both companies – Fitch
  • Kaisa begins work on $ 12 billion offshore debt restructuring – source
  • Kaisa will soon sign an NDA with the advisor of certain bondholders – sources
  • Decisions on abstention, financing plan to take time – sources

HONG KONG, Dec.9 (Reuters) – Developers China Evergrande Group and Kaisa Group have been demoted to “restricted default” by rating agency Fitch due to non-payment of offshore bonds, while a source said that Kaisa had started to restructure his $ 12 billion. offshore debt.

The downgrades came on Thursday even as Evergrande (3333.HK) and Kaisa (1638.HK) did not officially announce defaults that could lead to lengthy debt restructuring processes.

In his memo to Evergrande, Fitch said the developer had not responded to his request for confirmation on coupon payments worth $ 82.5 million that were due last month, the grace period of 30 days ending this week.

Register now for FREE and unlimited access to reuters.com

Register now

“So we assume they weren’t paid,” he said.

Fitch defines narrow default as indicating that an issuer has experienced a default or distressed debt swap, but has not started liquidation processes such as bankruptcy filings and remains in business.

The non-payment has triggered an “event of default” on Evergrande’s bonds and its other US dollar notes will become immediately due and payable if the bond trustee or holders of at least 25% of the total amount on declare, Fitch said.

The same goes for Kaisa, who according to Refinitiv data has note maturities totaling $ 2.8 billion next year and $ 2.2 to 3.2 billion annually between 2023 and 2025.

Fitch said there was little information available about Kaisa’s restructuring plan after missing a $ 400 million offshore bond repayment on Tuesday.

Evergrande, which has more than $ 300 billion in liabilities and is at the heart of a real estate crisis in China, said last week it plans to move forward with a debt restructuring.

KAISA SPEAKS

Kaisa is expected to sign a non-disclosure agreement (NDA) soon with Lazard, the adviser to a bond group, the source and another person told Reuters. Bondholders own over 25% of Kaisa’s $ 12 billion offshore bonds.

The NDA will lay the groundwork for a more in-depth discussion on forbearance and funding solutions.

Formal discussions on the forbearance and the financing plan could begin once the NDA is in place, said the people, who declined to be named because the discussions are confidential.

But a deal is unlikely in the coming weeks as talks are still at an early stage, the first source said.

Kaisa said he was open to forbearance talks, but declined to comment on the rest of the details. Lazard declined to comment.

Kaisa’s group of offshore bondholders, who say they own 50% of the notes due on December 7, sent the company draft forbearance terms on Monday evening. Read more

The group previously offered $ 2 billion in new debt to help Kaisa pay off onshore and offshore debts, sources said. Other fundraising ideas are also on the table. Read more

Kaisa is also in talks with another bond group, the first person said.

Kaisa’s default came after he failed last week to secure the minimum 95% approval required from offshore bondholders to swap the bonds that were due on December 7 for new notes due on December 7. June 6, 2023 at the same interest rate.

Trading in Kaisa shares, which have lost 75% this year, was suspended on Wednesday. Evergrande’s stock has plunged 88% this year amid the debt crisis that has fueled concerns of wider contagion and prompted officials to offer assurances that the fallout can be contained.

The short-term risk caused by a few Chinese real estate companies will not undermine Hong Kong’s capital market, said Chinese central bank governor Yi Gang.

Register now for FREE and unlimited access to reuters.com

Register now

Reporting by Clare Jim, additional reporting by Andrew Galbraith; Written by Sumeet Chatterjee; Editing by Himani Sarkar

Our Standards: Thomson Reuters Trust Principles.