20211125-招银国际-Kaisa_-_Exchange_offer_and_sales_of_Kai_Tak_project_4页_449kb

CMBI Credit Commentary Summary - KIASAG

Core Content Overview

This document provides a credit commentary on Kaisa Group's (Kaisa) actions regarding the KIASAG $6.5\text{‰}$ '21 bonds and its broader financial obligations. The focus is on the exchange offer and consent solicitation process, as well as the asset sales and liquidity management implications for the company.

Key Details of the Exchange Offer and Consent Solicitation

• Exchange Offer: Kaisa has initiated an exchange offer and consent solicitation for the KIASAG $6.5\text{‰}$ '21 bonds, which are due on 7 December 2021.
• Principal Amount: The total principal amount of the bonds is USD400 million, with accrued interest capitalized into the new bonds.
• New Bond Terms:
  • Maturity: Extended to 6 June 2023 (18 months).
  • Coupon: 6.5% in cash or 7.5% if Kaisa elects PIK (Payment-in-Kind).
  • Consent Fee: 2.5 points.
  • Minimum Acceptance Level: 95% of the principal amount, equivalent to USD380 million.
• Deadline: The exchange and consent deadline is 2 December 2021.
• Default Risk: If the minimum acceptance level is not met, Kaisa may face an immediate default.

Asset Sales and Liquidity Management

• Sale of Kai Tak Stake: Kaisa sold its stake in the Kai Tak project to Far East Condortium and New World Development, generating net proceeds of HKD950 million.
• Total Proceeds: The total cash proceeds from the sale of Kai Tak and Tuen Mun projects are estimated at cHKD2 billion (cUSD258 million).
• Annual Coupon Payment: Kaisa's annual coupon payment for public USD bonds is USD1.2 billion, highlighting the need for liquidity support.
• Asset Liability Management: Despite the asset sales, Kaisa will need to conduct a more comprehensive asset liability management exercise to address its financial obligations.

Financial Obligations and Risks

• Missed Coupons: Kaisa must pay USD88.375 million by 11 and 12 December 2021 to cure missed coupon payments.
• Onshore WMPs: Kaisa has outstanding onshore WMPs of cRMB1.5 billion, with RMB396.6 million yet to be resolved.
• Public USD Bonds: In FY22, Kaisa will have USD2.8 billion in public USD bonds due, including RMB1.7 billion in 1H22.
• Cross-Default Trigger: The cross-default trigger for other KAISAGs is USD20 million in principal amount. If the exchange/consent is successful, the remaining outstanding amount will be less than USD20 million, thus not triggering cross-defaults.
• Hold-Out Repayment: There is a low chance of full repayment for bondholders who choose to hold out, even if the exchange/consent is successful.

Important Disclosures and Legal Notes

• Author Certification: The author certifies that the views expressed reflect their personal views and that no compensation is tied to these views.
• Trading Restrictions: The author and their associates have not traded in the covered stocks within 30 days prior to the report's issue and will not do so within 3 business days after.
• Disclaimer: The report is for informational purposes only and does not constitute investment advice. It is not an offer to buy or sell any securities.
• Legal Responsibility: The information is based on publicly available data and is not guaranteed for accuracy or completeness. CMBIS is not liable for any losses incurred from reliance on this information.
• Distribution Restrictions: The report is intended for specific recipients and may not be distributed to others without prior written consent.

Conclusion

Kaisa faces significant liquidity and default risks due to the need to secure consent for the exchange offer and cure missed coupon payments. The asset sales provide some relief, but the company must manage its broader financial obligations. The exchange offer is a critical step in avoiding immediate default, but it may not fully resolve the company's financial challenges. Investors should consider the risks and seek independent advice before making decisions.