Andrew Galbraith. Clare Jim. Donny Kwak

HONG KONG/SHANGHAI –Kaisa Group Holdings Ltd., and three units thereof had their shares suspended for trading on Friday. It happened after an affiliate failed to pay off onshore investors.

Kaisa, the Shenzhen homebuilder that has been able to guarantee wealth management products, announced on Thursday that it faced unprecedented liquidity pressure from a tough property market, rating downgrades, and a weak economy.

Kaisa Prosperity and Kaisa Prosperity, the company’s unit, stated in separate filings to exchanges that Friday trading was suspended while they wait for “inside information.” These companies didn’t elaborate.

Reuters last month reported, citing sources that Kaisa was looking to buy its Kaisa Prosperity property management unit and two Hong Kong residence sites as it struggles to pay off debts.

Kaisa’s problems are a result of concerns over a widening liquidity crisis within the Chinese property industry. In recent weeks, there have been a series of credit ratings downgrades, offshore debt defaults and sell-offs on the bonds and shares.

Kaisa is the Chinese developer with the highest amount of offshore debt, second only to China Evergrande Group.

Kaisa’s finance unit had failed to pay a fee for a wealth management (WMP) product, the developer stated on Thursday. The company was also raising money to alleviate the stress by increasing asset sales and taking other measures such as speeding up the sale of assets.

Kaisa intends to sell 18 of its Shenzhen assets, mostly retail and commercial, by 2022. This is according to a document Reuters saw on Friday.

These proceeds will go towards repaying the wealth management products. It also owns 95 Shenzhen urban renewal projects valued at 614 Billion Yuan. This can replenish the capital once it is completed or early disposed of.

Cailianshe, reporting unnamed sources with knowledge of the matter, said that several state-owned entities, including China Resources Land had been in discussions to acquire some Kaisa urban renewal projects.

China Resources has not yet responded to Reuters’s request for comment. Kaisa did not respond to Reuters’ request for comment.

DEEPENING LOSES

Kaisa holds approximately $3.2 billion worth of offshore senior notes. The next maturity is expected to be $400 million on Dec. 7. The company has coupons payments in excess of $59 million that are due on Nov. 11th and Nov. 12th.

The shares of Kaisa (Hong Kong listed) plunged to an all time low on Thursday. It is China’s largest developer, ranking 25th in terms of home sales.

A sub-index that tracks the mainland property market fell 2.8% on Friday. This brings its loss to 17.8% over the last two weeks. The index of A-shares in real estate also dropped 2.1%.

Evergrande’s shares fell to 2.5%, their lowest closing price since Sept. 21, after they were once China’s most powerful property developer.

According to Duration Finance and leading to sharp drops across all developers’ bonds, the company’s October 2022 11.5% bond yielded above 300% by more than 10%.

Evergrande was able to avoid a second default last week. However, Evergrande faces a hard deadline of Nov. 10, for $148 Million in coupon payments. These were due Oct. 11.

Scenery Journey, its unit, has coupon payments of more than $82million due Nov. 6. However the bonds terms allow for a 30 day grace period.

ETFs that track Asian high-yield dollars bonds fell nearly 1.5% during early trade. Spreads for Chinese high-yield debt were close to record levels.

Raymond Cheng (head of China research, CGS-CIMB Securities), stated that Kaisa could be yet another Evergrande and that investors’ concerns about the liquidity condition of developers have intensified.

“Even though there are some easing steps, it seems they may not be enough to assist that much,” he stated. “Unless we see aggressive loosening by the government, we anticipate that developers will have more problems paying their debts.

($1 = 6.4005 renminbi)