HONG KONG (Reuters) – A group of holders of offshore bonds issued by debt-laden Chinese developer Kaisa Group Holdings Ltd agreed to set aside up to $1 billion to buy bad loans from the firm’s onshore creditors, two people with direct knowledge of the matter said.
The fate of Kaisa, China Evergrande Group and other indebted Chinese property companies has gripped financial markets in recent months amid fears of knock-on effects around the world, although Beijing has repeatedly sought to reassure investors.
Kaisa is China’s largest holder of offshore debt among property developers after Evergrande, which has more than $300 billion in liabilities including both onshore and offshore debt.
Owning onshore Kaisa debt – usually more senior than offshore debt, giving holders stronger influence with the company in any restructuring talks – would help the offshore bondholders better understand the developer’s finances, the people said, declining to be identified because the talks were confidential.
Kaisa did not repay $400 million of bonds that matured last week, triggering cross-default provision on all its offshore bonds and prompting a downgrade to “restricted default” by Fitch Ratings.
The bondholder group, which has an aggregated $5.5 billion of Kaisa’s total $12 billion offshore notes, had last month proposed other options including $2 billion in fresh debt to the developer, but the talks have not yielded material result.
The acquisition of Kaisa’s non-performing loans will also help the recovery of offshore bondholders because it would prevent current onshore creditors from liquidating assets, the people with knowledge of the matter said.
Representatives of the bondholder group declined to comment.
Kaisa did not immediately respond to Reuters’ request for comment.
(Reporting by Clare Jim; Editing by Sumeet Chatterjee and Kenneth Maxwell)
