TROUBLED Shenzhen-based developer Kaisa Group disclosed yesterday that its debts now total more than US$10 billion and it needs to urgently restructure its borrowings in order for a proposed rescue deal by Sunac China Holdings to proceed.

    Kaisa said in a stock exchange notice that its aggregate interest-bearing debt stood at 65 billion yuan (US$10.4 billion) at the end of 2014, which includes trade creditors. As much as 35.5 billion yuan in this debt could be due before the end of 2015.

    The firm had previously reported that June 30, 2014 its borrowings only amounted to 29.8 billion yuan, though this number would not have included trade credit.

    Kaisa’s problems rattled Asian corporate debt markets at the start of this year after it failed to make a timely repayment on a HK$400 million (US$51 million) loan from HSBC and was late on a US$26 million bond coupon payment.

    Bondholders had hoped Sunac’s proposed acquisition of a 49.25 percent stake in Kaisa would help bring its debt situation under control, but yesterday’s disclosure indicates their borrowings could be higher than they had feared.

    Kaisa bonds due 2020 have dropped to 60 cents on the dollar, 15 points off the highs they struck after the news of Sunac’s proposed stake purchase. Trading in its shares was suspended earlier yesterday.

    Kaisa’s liquidity will be tested once again next month as it has coupon payments due on its bonds with 2017 and 2018 maturities. The firm also warned yesterday that it will experience a substantial decline in its net profit for 2014 and that its cash flow could be hit by an ongoing government block on sales at some of its developments in Shenzhen.

    The company’s problems escalated late last year after it was hit by the sales block and the subsequent departure of a string of senior executives, including founder chairman Kwok Ying Shing.

    Kwok’s exit triggered the mandatory prepayment provision in a HK$400 million HSBC loan, which it failed to repay, creating panic among investors after the company said it could default on other obligations.

    It missed a Jan. 8 deadline for paying a coupon on its bonds due 2020 but subsequently paid up within the 30-day grace period.

    Kaisa said it would hold a meeting with its onshore creditors and said it hoped to engage offshore creditors on a restructuring proposal as soon as is practicable. (SD-Agencies)