HONG KONG, Sept 19 (Reuters) - An offshore bondholders'
group of cash-strapped Kaisa is offering up to $2
billion to acquire stalled housing projects of the
Shenzhen-based developer to facilitate their completion, two
people with direct knowledge of the matter said.
The takeover talks are in early stages, according to the
people, who declined to be named as they were not authorised to
speak to the media on this subject.
If successful, it would be the first foreign investor
takeover of Chinese developers' distressed residential assets in
the latest wave of crises to hit the property sector over the
past year. It also comes as authorities are scrambling to
contain a mortgage boycott by homebuyers against stalled
Kaisa Group, the second-largest U.S. dollar bond issuer
among Chinese developers after China Evergrande Group,
is in the process of restructuring its $12 billion offshore debt
after defaulting on some bonds last year.
It is also struggling to repay its debt onshore and tap
capital to complete its projects.
The offshore bondholder group, which is being represented by
financial advisory group Lazard Ltd, made the offer to acquire
Kaisa's stalled projects to the developer's advisor CITIC
Securities, said the people.
The offshore bondholder group aims to offer up to $2 billion
to buy some non-performing loans from Kaisa's lenders, tied to
unfinished housing projects, at a 20%-25% discount and provide
the financing needed to complete the projects, they added.
The terms offered by the offshore creditors' group are
similar to those previously extended by Chinese asset managers
when buying the distressed assets of some developers in the
country, the people said.
Kaisa declined to comment. Lazard and CITIC did not respond
to request for comment.
As most of Kaisa's projects are in top-tier Chinese cities,
where housing prices are relatively resilient, bondholders
expect to reap the profits after the completion of the stalled
projects, said the two people.
They have also offered to split profits with Kaisa after
certain returns, while the extra liquidity recouped could help
the developer's business and operations, which would also be
beneficial for its debt restructuring, they added.
Evergrande and Kaisa have been at the centre of a stifling
cash squeeze in the Chinese property sector, which accounts for
a quarter of the economy and which has lurched from one crisis
to another in the past year, roiling global and local markets.
A string of developers, including Evergrande and Kaisa, have
defaulted on billions of dollars worth of dollar bond
obligations since the second half of last year, forcing
bondholders to enter into long and cumbersome debt restructuring
It is unclear how many stalled projects would be covered by
the bondholder group's offer, and how many of them meet the
purchase criteria laid out by the group.
The group proposed that, among other criteria, the projects
must be located in first or second tier cities, have no
off-balance sheet loans and own permit to pre-sale.
With a view to help revive onshore projects and advance the
offshore restructuring talks, the bondholders' group has also
offered to take a 20% haircut on Kaisa's dollar notes and inject
equity capital, said the two people and two other sources.
Under the proposal, Kaisa would raise $550-$700 million by
issuing new shares, the two people with direct knowledge of the
matter said. While that would dilute Kaisa Chairman Kwok Ying
Shing's stake in the company, there would be a provision for him
to raise his shareholding again, they added.
To revitalise its projects and improve short-term liquidity,
Kaisa said in April it had entered into strategic co-operation
agreements with state-owned China Merchants Shekou Industrial
Zone Holdings and China Great Wall Asset Management.
A person close to Kaisa had said at the time the agreements
with state-owned companies were expected to help restore
homebuyer and regulatory confidence in the embattled developer.
(Reporting by Clare Jim; Editing by Sumeet Chatterjee and Ana
Nicolaci da Costa)