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China's Kaisa unveils first results in 2-1/2 yrs, shares to resume trading
March 26, 2017 / 1:19 PM / 8 months ago

China's Kaisa unveils first results in 2-1/2 yrs, shares to resume trading

HONG KONG, March 26 (Reuters) - Since defaulting on its dollar-denominated bonds Chinese property developer Kaisa Group made its first financial report in 2-1/2 years on Sunday, paving the way for its shares to resume trading on Monday.

Total aggregate borrowings stood at 87.5 billion yuan ($12.7 billion) at the end-2016, with about 7.8 billion yuan of the total repayable within a year, Kaisa said in a statement to the Hong Kong stock exchange.

The Shenzhen-based company, which had total debt of $11 billion at the end of June 2014, failed to repay its creditors after some of its developments were blocked from sale by local authorities late that year, exposing the political risk and high leverage players face in the sector.

But Kaisa’s business slowly recovered in the second half of 2015 after it proposed a debt restructuring, and it posted record-high contracted sales of 29.8 billion yuan ($4.33 billion) in 2016. That surpassed the pre-crisis level in 2013 when it reported sales of 23.9 billion yuan.

“The group actively facilitated the negotiation of its onshore debts and restructuring of its offshore debts to lift blockages and re-launch projects for sale in major cities to unleash sales momentum,” the company said in a statement to the Hong Kong stock exchange.

Kaisa’s loss for the year attributable to equity holders was 612.4 million yuan, down from 1.12 billion yuan in 2015.

Its net loss for the year, excluding gains on extinguishment of financial liabilities, changes in fair value of investment properties and financial derivatives, net of deferred tax increased to 4.16 billion yuan, a 2 percent rise from 2015.

Kaisa said revenue rose 62.6 percent to 17.8 billion yuan.

“It was nearly the number one in Shenzhen before the blockade, and Shenzhen home prices have risen a lot, so its cashflow could be able to cover much debt if its sales are okay,” said CRIC Hong Kong head of research David Hong.

The company’s shares have been suspended from trading in Hong Kong since March 31, 2015, and they were not allowed to resume trading before reporting updated financial statements, according to stock exchange rules.

Kaisa, which owed $2.5 billion to offshore creditors, last March sweetened a debt-restructuring proposal that offered offshore investors higher coupons and amended payments contingent upon certain milestones.

Although the total interest payable at the end of June is $99.5 million, according to Thomson Reuters data, there is no cash implication as it’s all payment-in-kind in the first year.

The group plans to repay offshore debt from 2019, after addressing onshore debts in the 2017-19 period.

Kaisa bonds have been performing well on the back of recovering contract sales and a generally buoyant high-yield market.

But analysts have called into question how credible Kaisa’s financial statements are, after Kaisa’s restructuring advisor FTI Consulting questioned its pre-2014 accounting records.

According to a statement issued in December, FTI found that during the period 2012-2014, the developer had misclassified outstanding loan liabilities totalling 30.8 billion yuan and its former employees had attempted to obscure the existence of these 41 loan agreements involved through an elaborate scheme.

“Its balance sheet will need to be discounted,” Hong said. ($1 = 6.8870 Chinese yuan renminbi) (Reporting by Clare Jim and Umesh Desai; Editing by Anne Marie Roantree, Greg Mahlich)

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