Moody’s drops Kaisa CFR, debt to Ca

Moody's Investors Service said it downgraded Kaisa Group Holdings Ltd.'s corporate family and senior unsecured debt ratings to Ca from Caa3.

The outlook is negative.

On Jan. 12, Kaisa updated the market on developments surrounding the company.

The key events covered by its announcement include: (a) Its default on the interest payment of $23 million which had been due Jan. 8, 2015 in relation to the $500 million 10¼% senior notes due 2020; (b) the termination of the plan to sell its Shanghai project to China Vanke Co. Ltd. (Baa2 stable); (c) the fact that its total bank balance of about RMB 447 million and RMB 266 million has been frozen and is under investigation by several banks; and (d) its receipt of a civil ruling from a court in China on the preservation of assets amounting to RMB 651 million.

"The ratings downgrade reflects our expectation of weaker recovery prospects for Kaisa's bondholders," Moody's vice president and senior analyst Franco Leung said in a news release.

"The increased level of legal actions against the company will further disrupt its operations and will erode its asset values."

Moody's said it believes that Kaisa's default on its interest payment highlights its high level of financial constraint, although it has 30-day cure period to make up the coupon payment and avoid an event of default.

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