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A Singapore-based hedge fund has filed a winding-up petition in Hong Kong against the defaulted developer Kaisa. This marks one of the first cases addressing the mainland debt of a Chinese developer following a property sector downturn.
Hedge fund Broad Peak Investment Advisers submitted the court filing in Hong Kong amidst a liquidity crisis faced by Chinese property developers. The collapse of the sector has had adverse effects on China’s economy, which is now on the brink of deflation.
Several Chinese developers listed on the Hong Kong Stock Exchange, including Evergrande, the world’s most indebted property developer, are currently confronting winding-up petitions. However, Broad Peak’s petition stands out as it concerns the non-payment of Rmb170mn ($24mn) worth of onshore bonds.
“It’s definitely interesting,” commented Nicholas Chen, an analyst at CreditSights in Singapore. “It demonstrates the impatience and frustration that even onshore creditors are experiencing with the restructuring efforts, or rather the lack thereof, by some of these developers.”
Since late 2021, numerous Chinese developers have defaulted, leading to protracted and opaque restructuring processes for international investors attempting to recover their investments. Offshore bondholders closely monitor this case to understand how onshore claims might impact the international restructuring process.
“Onshore creditors are typically the first in line to liquidated assets,” Chen added. “It’s possible that these onshore creditors are trying to accelerate the process and secure some form of recovery.”
Kaisa, in a filing to the Hong Kong stock exchange on Monday, stated that it would “vigorously oppose the petition” and continue collaborating with offshore creditors on a restructuring plan. Broad Peak declined to comment on the matter.
Kaisa’s Hong Kong shares, which had already reached an all-time low after trading resumed in March following a year-long suspension, declined by over 15% on Monday. A court hearing is scheduled for September 13.
Kaisa was among the first developers to default in late 2021, resulting in contagion within the sector. As of last year, the developer had total liabilities exceeding Rmb200bn.
In January, Kaisa faced a lawsuit in New York filed by Hong Kong-based Oasis Capital Management, claiming non-payment of approximately $102mn in principal and interest related to four bonds worth $90mn.
Evergrande, the only developer with more international debt than Kaisa, unveiled its offshore restructuring plan in March. The plan included granting bondholders access to offshore assets listed in Hong Kong.
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