After 10-Year Absence, Kaisa Chairman Returns to Mainland to Clear Up Debt Mess

Kaisa Group Holdings Ltd. Chairman Kwok Ying Shing ended his near decade-long absence from mainland China to manage the defaulted developer’s project deliveries and debt restructuring. This return stems from his concern over Kaisa's financial struggles and due to his past association with a corrupt former senior official in Shenzhen, Kwok had been living in Hong Kong to avoid fallout from corruption probes [para. 1][para. 2][para. 3].

Kwok returned to the mainland city, where Kaisa is headquartered, around the end of February and also visited Beijing, Guangzhou, and Huizhou to inspect projects and understand market conditions [para. 2][para. 3]. His primary aims include handling property project deliveries and addressing debt issues, particularly focusing on repayments by Shenzhen Jinheng Wealth Management Co. Ltd., a Kaisa subsidiary. Kaisa had failed to redeem three wealth management products in November 2021, causing protests from investors. Jinheng Wealth had repaid about 8 billion yuan ($1.1 billion) in principal and interest, achieving 60% to 70% overall repayment progress, though this had slowed down [para. 4][para. 5][para. 6].

Upon Kwok's return, Jinheng Wealth proposed two repayment proposals with cash payments and asset packages. News of Kwok's return led to a 5.38% rise in Kaisa's Hong Kong-listed shares [para. 7][para. 8]. Kaisa started missing dollar-bond payments in December 2021 amid a liquidity crisis in China's property sector. The latest update on their debt restructuring noted a 51% increase in their 2023 losses, amounting to 19.7 billion yuan. Kaisa aims to negotiate a comprehensive restructuring plan with creditors soon [para. 9].

Kwok’s troubles commenced in October 2014 when Shenzhen official Jiang Zunyu faced a corruption probe. Kwok, linked closely with Jiang, feared repercussions and moved to Hong Kong, resigning from Kaisa. He admitted to illegal dealings with some government officials but was pressed for more information. Kaisa projects in Shenzhen were frozen as authorities possibly used this to coerce Kwok back to the mainland, coinciding with the company defaulting on a loan from HSBC Holdings [para. 10][para. 11][para. 12][para. 13].

Jiang Zunyu was later sentenced to life in prison for bribery, having accumulated substantial illicit funds [para. 15]. Kwok’s return after nearly ten years suggests he may have reached some understanding with mainland authorities, likely agreeing to cooperate with ongoing investigations. He has also attended multiple events since returning [para. 16][para. 17]. Kaisa has been working to avoid liquidation, with a Hong Kong court adjourning a hearing on a winding-up petition to give more time for debt agreements. Progress has been made in principle with creditors holding over a third of Kaisa’s offshore borrowings [para. 18][para. 19].

To raise capital, Kaisa has been selling properties in Shenzhen, expanding its list of saleable assets from 18 to 25, valuing them at 81.8 billion yuan [para. 21]. Amid the property sector's financial crisis, Hong Kong has become a crucial focal point, formerly serving as a gateway for high-yield offshore bonds. Several other Chinese developers, including China Evergrande Group, have received wind-up orders. Recent government measures in China aim to rescue the debt-laden property sector by relaxing mortgage rules and encouraging local authorities to purchase unsold homes [para. 22][para. 24].