A GROUP of bondholders at Kaisa Group has rejected a proposal by the struggling Shenzhen-based property developer to restructure its US$2.5 billion debt, which could scupper a takeover deal by larger rival Sunac China Holdings.

    The group, which owns more than 50 percent of Kaisa’s bonds, considered the company’s plan “very unfair,” their lawyer said Friday. Sunac had said the takeover proposal was conditional upon Kaisa resolving its debt issues.

    “The ball is in the company’s court to come back with a sensible counter offer. We haven’t given them a deadline,” said Neil McDonald, a partner at law firm Kirkland & Ellis.

    Kaisa is negotiating with its bondholders to avoid becoming the first Chinese mainland developer to default on its offshore debt. The company, mired in crisis since Shenzhen authorities blocked sales of some projects last year, had proposed that the maturity on six sets of bonds due each year through 2020 be extended by five years and that coupons be slashed.

    Kaisa debt woes underscore the slump in China’s key property sector, hit by the slowing economy and a raft of cooling measures.

    Under Kaisa’s current restructuring proposal, some US$800 million in bonds originally due in 2018 would now be due in 2023 and the coupon would be cut to 5.2 percent from 8.875 percent.

    The company had hoped to strike a deal by March 20 as Sunac has set a July 31 deadline for any deal. Two weeks ago, creditors pushed for better terms from the company, such as a guarantee for their bonds from Sunac.

    McDonald said there were other potential suitors if Sunac pulled out. He declined to give details, adding the bondholders did not think Kaisa would opt for liquidation.

    Kaisa’s liquidation would have far worse consequences for creditors: a report by advisors Deloitte Touche Tohmatsu said offshore creditors in a liquidation scenario would only receive 2.4 percent of what they were owed. (SD-Agencies)