HONG KONG, Dec. 2 (Reuters) – Chinese developer Kaisa Group Holdings Ltd (1638.HK) is unlikely to secure bondholder approval to extend the maturity of a $ 400 million bond due to the next week, analysts said, putting more pressure on other indebted peers.

Kaisa’s proposal to delay the maturity of the 18-month bond comes amid growing concerns from creditors about the ability of Chinese real estate developers to meet their short-term offshore repayment obligations.

In late October, some developers called on regulators to extend the maturities of their offshore bonds or undertake debt restructuring, as a growing number of defaults hit the industry.

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Kaisa needs at least 95% of its bondholders to approve a proposed $ 400 million offshore bond swap, 6.5% of which, due Dec. 7, for new notes due Dec. 6 June 2023 at the same interest rate.

At least one group of Kaisa bondholders had rejected the offer, according to a letter sent this week by their financial adviser to Kaisa’s board of directors, a copy of which has been reviewed by Reuters.

“The group believes that the terms of the exchange offer are unacceptable and illustrate a reluctance on the part of the company to consider more appropriate and holistic ways to address Kaisa’s current short-term liquidity challenges,” the company said. letter.

The group of bondholders mentioned in the letter sent to Kaisa offered a “hold period” to the company to delay the repayment in order to continue negotiations.

The bondholders, who say they own 50% of the debt Kaisa is trying to swap, have offered the Chinese firm $ 2 billion in new debt financing to help it avoid a default, two told Reuters. sources aware of the offer.

Exact details of the amount of funding or the terms of the offer were not disclosed. The sources could not be named due to confidentiality constraints.

There has been little interaction between Kaisa and the group since the offer was presented to the Chinese developer, the sources said.

Kaisa did not immediately respond to Reuters’ request for comment.

The company’s struggle to get a much-needed lifeline from its creditors will also weigh on other, smaller developers looking to avoid lengthy and messy litigation and restructuring processes, analysts said.

James Wong, portfolio manager of GaoTeng Global Asset Management Ltd, said that for Kaisa, debt restructuring is “quite certain” because the pass threshold for the proposed extension of bond maturity was too high. raised.

“Investors are waiting for this (restructuring) day to come,” he said, adding that small Chinese developers will continue to struggle.

Kaisa, who became the first Chinese real estate developer to default on his dollar bonds in 2015, said his ticket exchange offer would expire at 4 p.m. KST on Thursday unless it extended or terminate the proposal.

Kaisa is the second-largest issuer of US dollar bonds among Chinese real estate developers after China Evergrande Group (3333.HK), once the best-selling developer in China and now at the center of the country’s real estate liquidity crisis. Read more

A slew of other Chinese developers are also facing a wall of offshore debt maturing in the coming months, and some of them are scrambling to sell off some of their assets in order to raise funds to avoid defaults. payment.

Evergrande, which has more than $ 300 billion in liabilities, has not paid the coupons totaling $ 82.5 million due on November 6, and investors are eager to see if the developer can meet its obligations before the end of it. a 30-day grace period on December 6.

Despite the unprecedented funding crunch caused by the regulatory crackdown on debt build-up in the industry, some developers are now able to raise new credit in the domestic market.

Three developers plan to sell bonds in China to raise a total of $ 2.8 billion, signaling that Beijing is easing liquidity pressures slightly for the sector. Read more

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Reporting by Scott Murdoch in Hong Kong and Samuel Shen in Shanghai; Written by Sumeet Chatterjee Edited by Shri Navaratnam

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