Asian Fixed Income/Frontier Market Research

Bondcritic

Bondcritic, established in 2009, is designed to be an independent credit research voice that helps investors gain insights and unbiased analyses on Asian fixed income market. Our mission is to discover deep-value Asian high-yield and distressed bonds with a bottom-up approach, together with the help of our proprietary ESG (Environmental, Social Development, and Governance) model. At the same time, we focus on bringing investment cases of unrated and unloved issuers to the general public.

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Asia ex-Japan Credit - Analyst, Bondcritic

Brayan Lai

Asia ex-Japan Credit - Analyst

Credit

Kaisa Group (“Kaisa”) will probably go down in history as one of the most curious situations in the market. In our view, the company can certainly hold the infamous title of being the only Chinese property developer (at this point in time) to willingly default in the offshore debt markets, despite the fact that other Chinese developers have come close in the past.To recap, Kaisa was a fine operating company until the company was questionably caught up in President Xi’s nationwide corruption probes. As such, the surprise investigation caught the market unawares and involved numerous vested interests from company contractors, suppliers, government agencies, banks and customers (who nearly rioted outside showrooms in the past).Fast forward nearly 3 years from the beginning of its problems, Kaisa has engineered a miraculous comeback, assisted by strong credit markets and its traditional brick-and-mortar profile. Thus, we can now give the company a cautious clean “bill of health” and send it on its way.We are already well familiar with Kaisa but have had to trawl through old data and information to exorcise our own demons with this credit. In this report, we recount the company's history, including debt restructuring and the unusual audit issues which brought the company to its knees. As the company has largely addressed these issues, we see a tactical trade in this credit. Lightning can strike twice in the same spot but we don't think it could happen here again in the near future.

Kaisa Group (“Kaisa”) will probably go down in history as one of the most curious situations in the market. In our view, the company can certainly hold the infamous title of being the only Chinese property developer (at this point in time) to willingly default in the offshore debt markets, despite the fact that other Chinese developers have come close in the past.To recap, Kaisa was a fine operating company until the company was questionably caught up in President Xi’s nationwide corruption probes. As such, the surprise investigation caught the market unawares and involved numerous vested interests from company contractors, suppliers, government agencies, banks and customers (who nearly rioted outside showrooms in the past).Fast forward nearly 3 years from the beginning of its problems, Kaisa has engineered a miraculous comeback, assisted by strong credit markets and its traditional brick-and-mortar profile. Thus, we can now give the company a cautious clean “bill of health” and send it on its way.We are already well familiar with Kaisa but have had to trawl through old data and information to exorcise our own demons with this credit. In this report, we recount the company's history, including debt restructuring and the unusual audit issues which brought the company to its knees. As the company has largely addressed these issues, we see a tactical trade in this credit. Lightning can strike twice in the same spot but we don't think it could happen here again in the near future.

Kaisa(-Ga) Group: Through Fire and Brimstone

Kaisa Group Holdings

Kaisa(-Ga) Group: Through Fire and Brimstone