KWG Group Holdings Ltd. is proposing to exchange $900 million of dollar bonds due this month, becoming the latest Chinese developer seeking to push out debt repayments amid the sector’s ongoing crisis.
(Bloomberg) — KWG Group Holdings Ltd. is proposing to exchange $900 million of dollar bonds due this month, becoming the latest Chinese developer seeking to push out debt repayments amid the sector’s ongoing crisis.
The country’s 43rd-largest builder by contracted sales offered to swap at least 90% of the principal due Sept. 15 and Sept. 21 with bonds that would mature in January 2024, according to an exchange filing. Guangzhou-based KWG is also looking to exchange at least 80% of a $700 million note that matures September 2023. Bondholder voting on the proposal ends Sept. 9.
The three notes rose as much as 5 cents on the dollar as of 5 p.m. Friday in Hong Kong, according to Bloomberg-compiled prices. KWG’s extension proposal is more generous than what some peers have offered, Bloomberg Intelligence credit analysts Dan Wang and Andrew Chan wrote in a note, as repayments would be amortized and holders of the 2022 notes backing the swap would get incentive and upfront cash equal to 5.5% of their principal.
The bonds set to mature this month have largely traded below 30 cents since July, signaling investor doubts about on-time repayment. The company last week repaid a 1.8 billion yuan ($261 million) onshore note after nearly all of its holders opted for early repayment. KWG said in Friday’s filing that if the exchange offer and proposed default waivers involving other dollar bonds aren’t enacted the firm may consider a debt restructuring.
Numerous developers have asked bondholders to push out payments through extensions or bond exchanges in efforts to avoid defaults. Missed payments on offshore debt have surged to record levels this year, nearly all by property firms, as a liquidity crisis has gripped the sector amid slumping sales. Authorities have been ramping up support of late to alleviate the funding squeeze and hasten completion of unfinished projects.
Following the release of KWG’s first-half results, analysts at CGS-CIMB wrote in a note Thursday that the developer was likely to request a payment extension for the September dollar bonds because of a worsened financial position. “Progress on asset sales in China and Hong Kong has also been very slow due to weak market sentiment or unexpected factors faced by the company,” the analysts said while downgrading KWG shares to hold.
The stock fell 5.5% Friday to finish at its lowest level since 2009.
(Updates bond and stock prices, adds comment in the third paragraph.)
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