The loan default by Kaisa Group Holdings Ltd., after the second surprise exit of a Chinese property tycoon in six months, is prompting investors to ask who’s next.
The 2019 notes from the builder, based in the southern city of Shenzhen, have tumbled 38.4 cents on the dollar to a record low of 25.3 cents, after the resignation of the developer’s chairman triggered a loan default Dec. 31. The perpetual securities of Agile Property Holdings Ltd. dropped 17 cents to 67 since its billionaire chairman was placed under control of prosecutors in September before being released last month without details of the detention.
China’s junk dollar notes have lost 3.9 percent in 2015, the worst start to a year ever in Bank of America Merrill Lynch indexes, after Kaisa Chairman Kwok Ying Shing resigned days after two other executives left their positions. Developers that rely on personal relations in securing land from the government are among the most at risk from President Xi Jinping’s local-government financing shakeup and anti-graft drive.
“You never know where the skeletons in the closet are or what company will be next,” said Charles Macgregor, head of Asia high-yield research at Lucror Analytics Pte, the Singapore-based independent credit researcher focused on high-yield markets. “There’s always been a bit of a corporate-governance premium on Chinese developers and that will increase because of the latest challenges.”
