Chinese developer Kaisa Group halts trading as property woes grow

BEIJING: Chinese developer Kaisa Group suspended trading in its Hong Kong-listed shares on Friday, raising concerns about a deepening cash flow crisis at the firm, as China’s crucial property sector comes under intense pressure.

The announcement came as a liquidity crisis at one of the nation’s biggest property developers, China Evergrande, throws a spotlight on the real estate industry after a state crackdown that has rattled investors and fuelled fears of a wider economic fallout.

It also follows Chinese media reports that wealth money owed on management products related to Kaisa had not been paid by their due date, and that the company had admitted it was facing “unprecedented pressure on its liquidity”.

In a brief notice to the Hong Kong Stock Exchange, the group said the suspension was “pending the release by the company of an announcement containing inside information”.

Last week, the ratings agencies Fitch and S&P downgraded Kaisa, citing refinancing risks.

Fitch said the downgrade was because of Kaisa’s “limited funding access and uncertainty over the refinancing of a significant amount of the US dollar bond maturities and coupon payment”.

According to Bloomberg News, Kaisa is only the country’s 27th biggest property developer by sales but one of the largest dollar debt borrowers among developers, with more than $11 billion of bonds outstanding.

Troubles in China’s property sector are weighing on the authorities’ resolve to forge ahead with reforms to rein in excessive debt.

Evergrande, which is bogged down in more than $300 billion worth of debt, plunged into crisis after Beijing began clamping down on the country’s colossal property sector last year.

There have been suggestions that Beijing could be rolling back some of those rules though, with state media recently hinting that local banks had begun easing some credit controls on homebuyers and developers on the central bank orders.

For now, all eyes are on a key Saturday deadline for Evergrande to pay an $82.5 million coupon on a bond. The firm missed the initial payment last month but was given a 30-day grace period. It has stumped up for two others in recent weeks.

As the Shenzhen-based group works to shed assets, e-mobility firm Bedeo said on Thursday that it had acquired Protean Electric from a subsidiary of Evergrande New Energy Vehicle Group.

The Chinese authorities have urged Evergrande billionaire founder Xu Jiayin, also known as Hui Ka Yan, to use his personal fortune to alleviate the company’s debt crisis, according to reports.

Bloomberg said that his luxury assets alone, including a 60-metre yacht, business jets and houses under his name, have an estimated value of $485 million, which could help cover the bond coupons that are yet to come due or have grace periods ending this year.