Kaisa Group defaults on $52 million loan after chairman resigns

HONG KONG: Kaisa Group Holdings Ltd failed to pay a HK$400 million ($51.6 million) loan, raising questions about the Chinese developer's ability to pay other debts.

Automatic repayment of the August 2013 term loan facility from HSBC Holdings Plc was triggered by the Dec. 31 resignation of Kaisa's chairman, Kwok Ying Shing, the company said today in a Hong Kong stock exchange filing. The company is assessing whether its failure to pay the outstanding debt plus interest may trigger cross-defaults and have a material adverse impact on the company, it said.

Kaisa's stock fell 47 percent in December -- its steepest monthly decline on record -- as authorities in the southern Chinese city of Shenzhen blocked its projects and key personnel departed. Standard & Poor's Ratings Services said after two executives resigned that Kaisa may face "more challenges" in the days ahead while Moody's Investors Service cut the company's credit rating to B3 from B1.

Routine applications for licenses, permits and project approvals haven't been accepted, while an application for a certificate allowing land acquisitions has been suspended, Kaisa said in a statement on Dec. 21. Approvals for two projects in the city's Longgang district have been withheld. Kaisa announced Dec. 10 that Kwok, a co-founder, would resign for health reasons at the end of the month. The company's shares were halted from trading Dec. 29, the day after Chief Financial Officer Cheung Hung Kwong and Vice Chairman Tam Lai Ling also resigned. The stock will remain suspended pending further announcements, Kaisa said today.