Kaisa in strategic deal with state-owned builder and bad debt manager

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What’s new: Default Developer Kaisa Group Holdings Ltd. unveiled a strategic deal with a state-controlled builder and one of China’s leading bad debt managers, becoming one of the few major private developers to avoid major liquidity problems.

China Merchants Shekou Industrial Zone Holdings Co. and China Great Wall Asset Management Co. have entered into a strategic cooperation agreement with Kaisa to develop real estate, tourism and other businesses in a region including Hong Kong and Macau, it said on Tuesday. promoter.

The strategic cooperation may have been coordinated and brokered by the government, a person familiar with the deal said.

China Great Wall Asset Management lent to Kaisa. It currently has 2-3 billion yuan ($314-472 million) in funding balance with the developer.

The background: Kaisa is one of a string of cash-strapped big property developers in China, including China Evergrande Group, whose precarious situation is rocking global bond markets. Known as the first Chinese developer to default on its dollar debt in 2015, Kaisa was tagged failing after failing to repay a $400 million bond that matured on December 7.

According to the company’s financial report, Kaisa had total assets of 319.1 billion yuan at the end of June 2021, with liabilities of 237.7 billion yuan. But like most Chinese developers, Kaisa also has significant off-balance sheet liabilities that are difficult to estimate.

Kaisa stepped up asset sales to raise capital. The company has listed 18 properties in Shenzhen, mostly urban renewal projects, with a total valuation of 81.8 billion yuan. The list was expanded to 25 projects in November, but no deal was reached.

Kaisa’s shares have been suspended from trading in Hong Kong since April 1, as required by listing rules, because it was unable to release its 2021 financial results by the March 31 deadline. .

Quick Takes are condensed versions of China-related stories for quick news that you can use. To read the full story in Chinese, click here.

Contact journalist Denise Jia (huijuanjia@caixin.com) and editor Bob Simonon (bob.simison@caixin.com)

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