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Source: Securities Times

Kaisa, known as the "Phoenix" in the industry, became the first real estate company to resume trading on the Hong Kong Stock Exchange after being suspended for 343 days. However, the company still needs to go through many tests if it wants to be reborn.

On August 20, Kaisa Group announced on the Hong Kong Stock Exchange that it had entered into a restructuring support agreement with a group of creditors. The relevant claims accounted for more than 34% of the total outstanding principal of debts within Kaisa and more than 36% of the total outstanding principal of debts within Ruijing.

The announcement stated that the success of the restructuring requires broad support, and the company urged all Kaisa and Ruijing debt holders who have not signed the restructuring support agreement to join the restructuring support agreement as soon as possible. Kaisa Group believes that the proposed restructuring is intended to provide the company with long-term recovery space to maintain business stability and provide sufficient financial flexibility to achieve a sustainable capital structure and increase net asset value.

Public market information shows that Kaisa Group announced a debt default in December 2021.

In October last year, Kaisa Group issued an announcement on its overseas debt restructuring. According to the announcement, Kaisa Group has contacted holders of overseas debts with a total principal amount of US$12.3 billion. Investors holding 35% of the total principal amount of the above US$12.3 billion debts have formed a creditor group. Kaisa Group has proposed a preliminary overseas debt restructuring plan to the creditor group, which mainly involves debt-to-equity swaps, issuance of new bonds, and sale of assets.

When the offshore debt restructuring plan was initially drawn up, Kaisa Group also faced a liquidation petition from investors overseas. Kaisa Group issued an announcement on the Hong Kong Stock Exchange on August 12, saying that the hearing of the liquidation petition had been further postponed to September 9, 2024.

Earlier, there were market reports that Kaisa Group Chairman Guo Yingcheng had returned to the mainland to hold talks with local officials. This was the first time Guo Yingcheng had returned from Hong Kong in nearly a decade.

The reporter sorted out the annual report and found that in 2023, Zhaoye achieved operating income of 26.159 billion yuan, a year-on-year increase of 3%; gross profit was about 1.699 billion yuan, a year-on-year decrease of 49.9%, and the gross profit margin for the year was 6.5%. The loss in 2023 was 19.702 billion yuan, a year-on-year increase of 51.4%. In 2023, the group delivered 61 projects with a total of 46,000 houses in Shenzhen, Guangzhou, Shanghai, Hangzhou, Nanjing, Huizhou, Wuhan, Changsha, Luoyang and other cities, and the delivery of new houses reached a record high.

Kaisa pointed out in its annual report that from the perspective of the industry as a whole, the real estate market will still face certain pressure in 2024. If the economy improves, the willingness to buy property improves, and factors such as urban village renovation are added, the scale of real estate sales may achieve a small increase; new construction and investment across the country will still face downward pressure in the short term. It is expected that the "three major projects" will be the main focus of policy efforts, which is expected to play an important role in stabilizing investment in 2024, and will also play a positive role in sales recovery and stabilizing expectations.

On the same day, R&F Properties announced on the Hong Kong Stock Exchange that its Hong Kong subsidiary, Zhao Xi, had received a winding-up petition. The board of directors believes that neither the petition against Zhao Xi nor the petition against R&F Hong Kong represents the interests of Zhao Xi, R&F Hong Kong or other shareholders of the company. The petitioner is only one of the lenders of the loan and only holds 18% of the outstanding principal amount of the loan.

Liu Shui, director of corporate research at China Index Academy, believes that in 2024, more distressed companies will make significant progress in debt restructuring, and the risk clearance of real estate companies will accelerate. At the same time, the successful debt restructuring of some real estate companies will have a strong reference significance for the debt restructuring and risk resolution of other distressed companies.

Recently, under the circumstance that overseas debt financing of real estate enterprises continues to be sluggish, very few private real estate enterprises in trouble have still successfully obtained refinancing. However, some industry insiders believe that most of the successful overseas financing cases are high-quality projects or strong enterprises, and it cannot be assumed that the overseas financing of real estate enterprises has begun to pick up because of a single successful case.

Liu Shui, director of corporate research at China Index Academy, said that since the beginning of this year, real estate companies such as Zhongliang and Aoyuan have completed debt restructuring and successfully relieved short-term debt repayment pressure, but there are many real estate companies that have not yet completed overseas debt restructuring, which has accumulated great debt repayment pressure. In the short term, the sales market is still bottoming out and recovering, and the risk of overseas debt has not been cleared. Overseas debt issuance will still be open to a few high-quality real estate companies, and the overall recovery will take some time.