Kaisa woes deepen after HSBC loan default
Other creditors are likely to demand repayment from troubled developer
Kaisa Group Holdings has defaulted on a loan from HSBC Holdings, which may trigger a snowball of other creditors calling in their loans to the troubled mainland developer.
In an announcement last night, the Hong Kong-listed firm, which has been blocked by the Shenzhen government from selling flats at four projects, said it had defaulted on a HK$400 million loan from HSBC.
It said it had received a notice from the bank demanding repayment of the loan plus interest by December 31 last year.
"As at the date of this announcement, the company has failed to repay the outstanding facility to HSBC. The company is assessing the impact of the default on other loan facilities, which may trigger cross-default, which may in turn have a material adverse impact on the financial position of the company," Kaisa said.
Given the HSBC loan default, it was highly likely that other banks that had lent Kaisa money and bondholders would demand immediate repayment, said an analyst.
"Other banks are likely to call in their loans. Otherwise, there may be nothing left in the company for them. No bank would probably want to give Kaisa financing because the company's future is uncertain," the analyst said.
Kaisa had issued a number of high-yield bonds and it was common for such bonds to contain a covenant granting bondholders the right to call for repayment if the company defaulted on other loans, he said.