CITIC takes over $9 billion from Kaisa Shenzhen projects
Kaisa Group, the second largest issuer of US dollar bonds among Chinese property developers after China Evergrande, appears to have found its white knight.
Chinese state-owned conglomerate CITIC, one of the cash-strapped developer’s main creditors, has taken over stakes in five Kaisa projects in Shenzhen worth more than 60 billion RMB ($8.9 billion). ) as part of a debt restructuring, with renamed projects now appearing on WeChat official account from the South China office of CITIC Urban Development & Operation.
The agreement calls for CITIC to complete construction and take over the marketing of the properties, which include a theme park, a residential complex and three mixed-use complexes measuring a total of more than 2.7 million square meters ( 29 million square feet) of gross floor area. . Kaisa owes more than 10 billion RMB to CITIC but has the option to buy back the assets after repaying his delinquent accounts, according to a report from the economic newspaper Caixin.
With Kaisa which first defaulted on its offshore debt in December last yearthe developer is said to have been in debt restructuring negotiations with CITIC since April, with the process now complete.
Over the past two weeks, CITIC has taken over the Kaisa Fintech Center, a combined office and retail complex in Shenzhen’s Futian District valued at RMB 8.2 billion, which it renamed CITIC Chengkai Tower. .
Kaisa’s RMB 29.8 billion Dongjiaotou slum project in Nanshan district, a commercial and residential development which is now known as CITIC Dongjiaotou, also finds its way into the balance sheet of CITIC.
Next on the list is Kaisa Golden Bay Resort a RMB 10.6 billion theme park project comprising 333,910 square meters of hotel, retail and residential space, where CITIC took over Kaisa’s 51% stake and renamed the development CITIC Chengkai Golden Bay Resort.
Shenzhen Kaisa City Plaza, an RMB 11.8 billion complex of residential apartments, hotel offices, retail and serviced apartments in Longgang District, is also owned by CITIC and the state-owned giant has also taken over Kaisa Oceanus Mangrove Bay, a 66,700 square meter residential project in Futian District which is now known as CITIC Chengkai Mangrove Bay.
Anatomy of a bailout
Under the terms of the deal, Kaisa Fintech Center was sold to CITIC while the other four projects were handed over under a debt swap deal, Caixin said, citing an informed source.
A special purpose vehicle (SPV) company, Chengkai Xin Yin, was registered on June 17 with directors from CITIC and Kaisa on its board. Chengkai Xin Yin then took over Kaisa’s 51% stake in the Golden Bay Resort as well as almost all of its 70% stake in the Shenzhen Oceanus Group – the developer of the Oceanus Mangrove Bay project, which also owns 51% of the Dongjiaotou slum project. .
On June 22, Chengkai Xin Yin became 100% owned by Western Trust Co Ltd. Through an agreement with Western Trust, China CITIC Bank derives revenue from these projects.
CITIC Urban Development & Operation, a wholly-owned subsidiary of CITIC Group, is supporting the construction and operation of the projects, while China CITIC Bank will provide financial support, including extending the maturity of existing liabilities, canceling the debt and granting new loans. to ensure the completion of the projects, according to Caixin.
The new loans from China CITIC Bank as well as the sales proceeds will be deposited in a government-supervised account and will be used for the construction of the project and the repayment of Kaisa’s wealth management products. Any remaining funds will be used first to repay bank loans and then to settle other debts associated with the projects.
Dubbed the “king of urban renewal” by Chinese media, Kaisa has some 200 urban renewal projects across China, generating more than a third of the group’s revenue, including 120 in his hometown of Shenzhen, where prices houses are among the highest in the world. country.
Like Evergrande, Kaisa has taken a heavy hit from China’s crackdown on housing bubbles and excessive borrowing. It failed to make a payment on wealth management products last November and said in December it had defaulted on four-dollar bonds.
All but the Mangrove Bay project were included in a list of 18 Shenzhen developments that Kaisa went on sale last November as he began looking for money.
In its run for default, Kaisa last November sold its stake in a residential site on the former runway of Kai Tak Airport in Hong Kong for HK$7.9 billion to a joint venture between New World Development and Far East Consortium. It is also selling its Shanghai headquarters for RMB 2.9 billion to container shipping company Zhonggu Logistics, with China Life acting as a middleman, according to an announcement from Zhonggu last month.
Trading in Hong Kong-listed Kaisa shares has been suspended since April 1 after the developer failed to release its 2021 audited financial statements by the March 31 deadline, citing the impact of the Covid-19 pandemic. .
In moves that raised concerns about the company’s financial situation, Kaisa on June 20, 20 announced the resignation of its chief financial officer and on June 27 appointed a new auditor. No timetable for the publication of its audited 2021 results has yet been communicated.
The deal with Kaisa represents the latest instance of CITIC, which was founded in 1979 and ranks as China’s largest conglomerate, taking over failed high-profile projects.
In October 2015, it acquired a 40 per cent stake in Chinese developer Advanced Business Park’s Royal Albert Docks regeneration project in east London after the development backed by then-Mayor Boris Johnson failed. stagnated by lack of customers.
Then, in April 2018, took a 49% stake in a joint venture with indebted private conglomerate CEFC China Energy, which gave him control of the energy company’s controversial assets in the Czech Republic. after CEFC chief Ye Jianming was arrested for corruption and his business went bankrupt.
CITIC already came to the rescue of Kaisa Group in 2015 after the developer’s projects were blocked by the Shenzhen government as part of a corruption investigation forcing Kaisa to default on a $26 million bond.
CITIC and Ping An gave Kaisa a lifeline by offering a 30 billion RMB loan and a 50 billion RMB loan respectively, which helped repay her debt.