Kaisa Group was downgraded two notches by both S&P and Fitch to CCC+ from B due to elevated refinancing risk. Both rating agencies cite that Kaisa has over $3.2bn in bond maturities (onshore and offshore) due in 2022 and also has substantial coupons on its USD bonds are $1bn per year. S&P notes that since Kaisa’s cash is trapped at project levels, only 30-40% of its RMB 40bn ($6.3bn) unrestricted cash can be readily accessible for debt servicing. Deteriorating capital market conditions are also adding pressure to its funding access. Kaisa’s land spending will largely pause for in 4Q2021 and could drop significantly further to 15% of contracted sales in 2022 from 25% in 2021. This and the focus on meeting bond maturities can lead to a weakening of Kaisa’s business profile. S&P adds that the developer “will need to rely on asset disposals and successfully improving its capital structure to avoid defaulting on its debt commitments”.
Kaisa’s dollar bonds are lower with its 10.875% Perp down 6.1 points to 22.3 cents on the dollar.