The Chinese property developer Kaisa Group Holdings Ltd. boldly promises to “bring you joyful living.” For some of its international bond holders, the reverse seems to be the case as two of its U.S. dollar bonds officially defaulted on April 20.
This is the first default of a Chinese property developer, although Evergrande has come close recently and the problems of the Chinese real estate market seem to get ever worse. In this case, Kaisa only missed two separate interest payments worth $52 million on notes denominated in U.S. dollars.
It is also not in a hurry to rectify the situation despite the fact it still has $2.1 billion in foreign denominated debt outstanding and is asking for a standstill:
“The Company is focused on facilitating the release of its 2014 audited financial results and following that release, will continue its efforts to reach a consensual restructuring of its outstanding debts,” a company statement released on the Hong Kong stock exchange reads.
Chinese property developers have roughly $21.3 billion of foreign bonds outstanding, and the question is why. Why raise money abroad when all of your revenue comes from China? A lower interest rate in the U.S. dollar market might be one answer.
