Kaisa was caught in the storm again, and the undead bird survived for the second time

21st Century Business Herald reporter Wu Shuying reported from Shenzhen

Kaisa's crisis seems to have come suddenly. More than two months ago, the industry was not as popular as it is now, and Kaisa employees were performing their duties as usual in their respective positions, not expecting them to usher in a storm.

When the traditional "golden nine silver ten" came, the peak season failed to arrive as scheduled, and the pressure of payment collection superimposed on the peak of debt repayment, Kaisa once again came to the brink of crisis.

Such a situation is not unfamiliar to the old employees who have followed Kaisa for many years. In 2014, Kaisa Shenzhen pre-sold a number of real estate listings were locked, cash flow quickly dried up leading to bond default, only one step away from selling, at that time Kaisa was also stormy. Finally, with the help of a number of banks, Kaisa turned the crisis into an opportunity, and fortunately ushered in the upward period of the Shenzhen property market and turned over smoothly.

Time flies. Kaisa was able to return from rebirth many years ago, which was not unrelated to the market and financing environment at that time. Today, Kaisa's ability to survive the current difficulties does not depend solely on its determination and decision to save itself. In the past two months, Kaisa has opened up and reduced expenditure through shrinking the front, reducing prices and promoting promotions, and mortgage assets, and its desire to survive is still quite strong, but it is not very effective.

On November 4, 2021, Kaisa's Jinheng Wealth deferred payment, tearing off a corner of the fragile capital side of this housing enterprise.

In response to the jinheng wealth exchange problem in the afternoon of November 4, Kaisa said, "The group has been actively raising funds, accelerating the de-assetization of precipitated assets and other measures, and making every effort to solve the current problems." Kaisa Group will determine the redemption plan with Jinheng Wealth as soon as possible and announce it to investors. ”

According to the situation learned by the 21st Century Business Herald reporter from the scene, The management of Kaisa Group President Mai Fan, Jinheng Wealth Group Chairman Wan Bing and other management is currently communicating with investors and discussing the formulation of a redemption plan. According to the data released by Kaisa on the spot, Jinheng Wealth is currently unpaid by more than 300 million yuan, and the total amount of wealth management products is about 12.7 billion yuan.

The downturn in the real estate industry is an indisputable fact, in the process of industry balance sheet reduction, the housing enterprises that used to operate with high leverage, high turnover and high debt also had to suffer. Kaisa is the epitome of the industry today. Spring may eventually come, but not everyone has enough equipment to withstand the winter, and some of their peers will have to regret to say goodbye to the past, an era in which they are no longer the protagonists.

Crisis fermentation

Around the beginning of October, Kaisa began to smell a different atmosphere inside.

"Before the capital chain was relatively tight, but it didn't feel like a big problem. After October, I felt that I was short of money, and there were many adjustments in the interior. A middle-level manager of Kaisa's industrial group told the 21st Century Business Herald reporter.

Looking back at Kaisa's mid-year report released in August 2021, that beautiful financial statement is also difficult for investors to predict Kaisa's current situation.

According to the report, as of the end of June this year, Kaisa's asset-liability ratio excluding advance receipts was 69.9%, the net debt ratio was 93.7%, the cash-to-debt ratio was 1.53 times, and the "three red lines" were all turned to "green"; in the same period, Kaisa's short-term borrowings and long-term borrowings were 25.017 billion yuan and 98.761 billion yuan, respectively, and the cash in hand was 48.74 billion yuan, which was able to cope with short-term debt.

However, just as Fantasia defaulted on dollar bonds without warning, Kaisa also had a redemption storm with almost no strong warning.

Carefully combed, such a situation is not without clues.

In fact, in the past two months, affected by the downturn in the market, Kaisa's sales situation has been very dismal. According to the announcement issued by Kaisa, in September 2021, Kaisa's contracted sales amounted to about 5.7 billion yuan, down 64.6% year-on-year; in October 2021, its contracted sales were about 8.195 billion yuan, down 30.49% year-on-year.

This is still the data completed under the premise that Kaisa has taken price reduction promotion measures.

In the past month, Kaisa has launched special-priced houses with different discounts in shenzhen, Wuhan and Kunming, which has also achieved better sales performance during the Golden Week. According to data released by Kaisa, during the Golden Week, Kaisa's national projects have accumulated more than 7,000 sets of housing transactions, with a transaction amount of more than 5.3 billion yuan.

As a capital-intensive industry, the chain reaction brought about by poor sales is the rapid reduction of payment collection, which is the lifeblood of housing enterprises. However, this is just one of the straws under pressure on Kaisa, and worse is brewing.

On October 4, 2021, Fantasia announced that approximately $206 million of the Company's outstanding notes had matured and had not been paid on the same day, constituting a material default.

The default of this dollar bond will quickly destroy the confidence of the capital market in housing enterprises. Since then, international rating agencies Fitch, Moody's and Standard & Poor's have intensively downgraded mainland real estate companies, with Kaisa among them.

On October 28, S&P downgraded Kaisa's long-term issuer credit rating from b to ccc+, with a negative outlook; on October 27, Fitch also downgraded Kaisa's long-term foreign currency issuer default rating (idr) from "b" to "ccc+", senior unsecured rating and the company's issuance of US dollar premium notes from "b" to "ccc+"; Moody's also downgraded Kaisa's rating to b2 earlier.

A financial institution source who understands kaisa's situation told the 21st Century Business Herald that after the rating downgrade, not only triggered the terms of early repayment of bonds, but also many ongoing financing was forced to be suspended. ”

In the past month, the price of Kaisa's dollar bonds has fluctuated sharply, and former hardcore supporters have also chosen to "cut meat" at this time. On October 28, China Land announced that from October 19 to October 28, 2021, China Land had conducted a series of over-the-counter transactions to sell using the US$255 million principal notes, which were issued by Kaisa Group.

So far, all three Kaisa US dollar notes subscribed by Huaren Real Estate have been cleared, with a total return of principal and interest of US$88.3202 million (equivalent to about HK$688 million). China Land expects to record a realised loss of approximately HK$1,355 million in profit or loss for the year ended 31 December 2021 as a result of the disposal.

The road to survival

Before the overdue payment of Jinheng Wealth, a subsidiary of Kaisa, Kaisa's internal self-help had begun.

The company, known as the "Undead Bird," has had a desperate experience. A few years ago, Kaisa and its actual controller, Guo Yingcheng, staged a counterattack battle when the company was about to change owners, which made the outside world have different expectations for the housing enterprise that was once again in trouble. In fact, Kaisa did show a strong desire to survive in the face of the crisis this time.

In the past two months, Kaisa's response has been relatively positive. A person close to Kaisa also pointed out that "the boss is not reconciled, he has been working hard and has not lying flat." ”

On October 3, 2021, Kaisa raised no more than US$120 million from China Shandong High-Speed Finance Group Co., Ltd. (hereinafter referred to as "Seco Finance") by mortgaging 67.18% of the equity of its property company Kaisa Meimei.

According to Seco Financial's announcement on October 3, on September 30, Seco Financial's indirect wholly-owned subsidiary entered into a subscription agreement with Yechang Investment, a wholly-owned subsidiary of Kaisa, agreeing to subscribe for notes issued by Yechang Investment with a total principal amount not exceeding US$120 million, with a maturity of approximately one year and a coupon rate of 11.5% per annum.

On the same day of the subscription agreement, Kaisa and Seco Financial also entered into a mortgage agreement to mortgage 67.18% of Kaisa Meimei's shares, which is Kaisa's entire shareholding in the listed company.

According to the 21st Century Business Herald reporter, Kaisa intends to put the property sector on the shelves, but in the current market situation, buyers are bound to be very cautious. "There have been plans to approach the bulk assets, but there is no further progress for the time being." A person with an understanding of the situation said.

The past month has also been spent internally by Kaisa in turmoil. For example, Kaisa Group previously issued a Notice on the Adjustment of the Organizational Structure of Southwest Group and the Appointment and Dismissal of Related Personnel, which abolished Chengdu Real Estate Company and Beijing Real Estate Company, and assigned relevant functions and personnel to Southwest Group and Beijing Group respectively.

Not only that, Kaisa's industrial groups have also streamlined their structures. According to the news obtained by the 21st Century Business Herald reporter, Kaisa Urban Renewal Holding Group was recently adjusted to the urban renewal business department, and its functions have also shrunk, and there have been certain changes in personnel.

"Some colleagues have left their jobs in situ, and basically all those who can be laid off have been laid off." But it is true that there were too many people in the past, which is also to reduce the company's bloat and make the management more flat. A person from Kaisa's industrial group pointed out.

However, in the context of the current limited financing channels and poor sales conditions, it is indeed difficult to predict how effective Kaisa's self-help measures can be. Kaisa's current complex situation is not only the overdue of wealth management products, but also the redemption of a maturity dollar bond in early next month.

This is a $400 million senior note with a maturity date of December 7. According to the information obtained by the 21st Century Business Herald reporter, Kaisa is currently raising funds in a variety of ways to cope with the redemption of this bond.

Under multiple pressures, Kaisa faces enormous challenges.

Still, as many years ago, many kaisa employees still believe they can get through as they did before.

A grassroots employee of Kaisa pointed out in an interview with the 21st Century Business Herald reporter, "Although there are some internal problems, in 2015, we did not die, and this time we will certainly not." Everyone is just living a hard life. As long as I can still pay my salary, I will still be here. ”

On November 4, 2021, Guo Yingcheng, chairman of the board of directors of Kaisa Group, also said in a telephone connection with investors that Kaisa is a responsible enterprise, giving Kaisa time, ability and methods to repay.

At a time when the market environment is deteriorating, investors and capital markets will not give Kaisa much time. Whether this "immortal bird" can survive the difficulties again is also unclear. In the case of a sharp rise of more than 12% in the previous day, as of the close of trading on November 4, 2021, Kaisa reported HK$1.01 per share, a sharp decline of 15.13%, with a total market value of HK$7.086 billion.

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