HONG KONG (Reuters) – Shares of Chinese developer Kaisa Group lost nearly a fifth of their value on Thursday and its bonds fell after rating agency downgrades that highlighted the company’s limited access to funding and significant U.S. dollar debt obligations.
Kaisa’s shares fell as much as 19.9% to an all-time low of HK$1.17 on Thursday afternoon, while its 11.25% April 2022 bond dropped more than 8 points to trade at less than 35% of its face value, according to data provider Duration Finance.
Ratings agencies S&P Global and Fitch both downgraded Kaisa on Wednesday to “CCC+” over concerns about its debt load.
S&P said Kaisa’s capital structure is unsustainable given the company’s sizable near-term debt maturities, weakening liquidity, and inadequate free cash flow through 2022.
Fitch noted that not all the cash on Kaisa’s balance sheet would necessarily be available to service its debt “given high minority interests and project commitments.”
The downgrades come after Kaisa attended a meeting on Tuesday with seven other developers, China’s state planner and foreign exchange regulator at which participants sought to contain the fallout from a debt crisis at China Evergrande Group, saddled with $300 billion in liabilities.
Some developers proposed extending offshore bond maturities and undertaking debt restructuring.
Refinitiv data showed Kaisa has 19 outstanding dollar bonds worth more than $12 billion, with a $400 million bond coming due in December. Bonds worth an additional $3 billion come due in 2022, on top of interest payments of around $1 billion, Fitch said.
Adding to indications of financial stress in the Chinese property sector, developer Oceanwide Holdings Co Ltd said on Thursday that holders of corporate debt issued by two of its offshore units have taken possession of the debt’s collateral after the units failed to repay the maturing notes.
(Reporting by Clare Jim and Andrew Galbraith; Editing by Christian Schmollinger and Christopher Cushing)
