The situation of the two stumbling Chinese real estate groups Evergrande and Kaisa is worsening. Evergrande Group President Hui Ka Yan was summoned by the Guangdong Regional Government late Friday after the troubled developer announced he was working with creditors on a plan to restructure its offshore debt.
According to a statement on the authorities website, the regional government will send a task force to urge the company to manage risk, strengthen internal controls and management, and ensure normal operations. This is reported by the Bloomberg news agency.
The development in Asia on late Friday came after the developer told the Hong Kong Stock Exchange that “there is no guarantee that the group will have sufficient funds to continue to meet its financial obligations.” Evergrande has received a request to meet its obligations from a guarantee of around 260 million US dollars, it said.
China’s central bank and banking and securities regulators made promises to the market that the risks surrounding Evergrande are under control, despite warnings from the developer that it may not have sufficient funds to meet its commitments.
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Kaisa: Not enough believers agreed.
In the midst of the excitement about China Evergrande, the noose is tightening around the also ailing rival Kaisa. The smaller competitor was initially unable to persuade foreign bondholders to extend the term of a bond of 400 million dollars due on Tuesday.
The Shenzhen-based company announced on Friday that the required approval from at least 95 percent of the lenders had not been achieved. Without the delay, Kaisa could face insolvency. According to insiders, talks are now underway with foreign creditors.
Kaisa said management has started negotiations with certain lenders. So far, however, there has been no legally binding agreement. Without such an agreement or in the event of a payment default, a massive deterioration in the Group’s financial position is to be feared, according to Kaisa.
In 2015, Kaisa became the first Chinese real estate developer to miss the repayment of a dollar bond. In the Chinese real estate industry, the company is number two after Evergrande in issuing such bonds.
In the now endangered bond, Kaisa had hoped to persuade the majority of the creditors to exchange it for a paper with an identical interest rate of 6.5 percent and expiring on June 6, 2023. A group of lenders, who say they hold around 50 percent of the bond, wanted to give Kaisa more time to negotiate a repayment and also promised two billion dollars in fresh money.
According to insiders, the talks on this offer have so far not been a resounding success. The nervousness among investors is already very high: Evergrande has admitted liquidity problems, and more and more real estate developers in China have been stumbling.
More: Next Chinese real estate developer stumbles – Fed warns of domino effect