First it was Evergrande, now it's Kaisa Group that has been cut to default status by the rating agency for non-repayments on notes. Fitch said the organisation, which has been suspended from the stock market, hasn't replied to requests to explain what has happened.

Fitch has cut another Chinese property developer to “restricted default” (RD), following its similar move on Evergrande last week, as concerns about the state of the country’s real estate sector continued.

One of the world’s “big three” rating agencies, Fitch late last week said that it had cut Kaisa Group Holdings Limited's long-term foreign-currency issuer default rating to “RD” from “C.” Fitch did, however, affirm Kaisa's senior unsecured rating and the ratings on its outstanding US dollar bonds at “C,” with the Recovery Rating remaining at “RR4.”

The group failed to repay its $400 million senior notes due on 7 December 2021, Fitch said, noting that there is no grace period for the bond repayment. Kaisa’s stock was suspended from trading on the Hong Kong Stock Exchange on 8 December. The firm did not reply to Fitch’s request for comments, the agency said. 

“Failure to make the principal payment is consistent with Fitch's definition of an `RD' rating, as the company has experienced an uncured payment default on a material financial obligation but has not yet entered into bankruptcy filing, administration, receivership, liquidation, or other formal winding-up procedures, and has not otherwise ceased operating,” Fitch said. 

Policymakers in Beijing have sought to rein in highly leveraged property developers, keen to avoid the kind of implosion that hit the US sub-prime market a decade ago. However, it appears tthat they have had to reverse course to some extent. The People’s Bank of China has twice this year cut its reserve requirement ratio (RRR) on banks to ease worries about a liquidity crunch. China’s Evergrande Group has defaulted on bond payments after stumbling through a series of deadlines in recent weeks. The saga has prompted commentaries from wealth managers wondering how far this will hit the Chinese economy and business further afield. One point to emerge is that China could lag behind the US in eventually tightening monetary policy.

According to its announcement on the Hong Kong stock exchange, Kaisa appointed a financial agent on 25 November 2021 to engage with holders of the US dollar bonds - due on 7 December 2021 - about extending its maturity date, but the company failed to get bondholders representing at least 95 per cent of the principal to agree to the extension, the Fitch statement said. 

Kaisa, which is based in Shenzhen, focuses on urban property development in the Greater Bay Area, including Shenzhen, Guangzhou, Foshan, Huizhou, Dongguan, Zhongshan and Zhuhai. The company has expanded to the Yangtze River Delta, western China, central China and the Pan-Bohai Bay Rim, Fitch said.