Restructuring Deal: Kaisa Group Holdings’ US$12.3bn restructuring
Aligned incentives
The successful restructuring of Kaisa Group Holdings’ more than US$12bn of offshore debt in 2025 introduced a new feature to Chinese developer restructurings by aligning the chairman’s interests closely with those of creditors.
Rather than create multiple buckets of options for different creditors, Kaisa adopted a more streamlined approach that could satisfy both long-term investors, such as asset managers, and hedge funds.
Kaisa cancelled 17 US dollar bonds while issuing six tranches of senior notes totalling US$6.69bn in principal and eight tranches of mandatory convertible bonds for the same amount. The tenors for the notes range from three to eight years while the MCBs mature between 2025 and 2032. The restructuring reduced Kaisa’s interest-bearing debt by more than 46%.
The property developer had been through a previous restructuring in 2016, but market conditions were much better then, enabling it to exchange the old debt for new notes without imposing punitive haircuts.
This time the journey to restructuring was a long one. Kaisa was one of the first in the wave of Chinese property company defaults after it missed a principal repayment in December 2021 on its US$400m 6.50% senior notes. The continued weakening of the property sector and divisions in creditor groups caused the restructuring process to drag on.
Kaisa had limited room to manoeuvre because it lacked cash and hard assets offshore, while its market capitalisation had shrunk.
“It was probably one of the most challenged credit profiles,” said a person close to the restructuring.
But the solution has put Kaisa in a position to recover as the sector improves while giving creditors the flexibility to benefit from a potential upswing and stay protected if the real estate market remains weak.
The restructuring included unique aspects to solve Kaisa’s difficult position. One is a call feature for the MCBs, a structure that incentivised the founder to redeem them at a discount to avoid dilution. A package of 35 urban renewal projects, 18 investment properties and other investments was used to provide credit enhancement.
Chairman Kwok Ying Shing supported the restructuring by agreeing that his Rmb115m (US$16m) shareholder loan could be used to subscribe to a future rights issue.
Additionally, the agreement included a management incentive plan, with 20% fully diluted equity made available to the chairman and management team if the company successfully repays or refinances the new notes.
Houlihan Lokey was financial adviser to Kaisa and Sidley Austin was legal adviser. PJT Partners advised an ad hoc group of creditors and Kroll Issuer Services was information agent.
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