I think there is a very high probability of a debt restructuring deal where the offshore senior unsecured bondholders get >66% of face value. Buy them while they're 27%. This is literally how Fitch got its recovery rating of RR4 (https://www.fitchratings.com/resear...cted-default-after-missing-payment-09-12-2021): 1. start by calculating a pessimistic liquidation scenario 2. even that worst case scenario results in "RR1" (91-100%) for all senior unsecured debt 3. Arbitrarily reduce the offshore portion of the senior unsecured debt to RR4 (31-50%) due to unspecified political risks. C'mon. China can't so blatantly rob offshore investors without undermining confidence and raising their cost of capital. Last time Kaisa defaulted in 2015, the bonds dropped to 30 cents on the dollar, but then rallied to 80 cents when the restructuring plan was approved This time, Kaisa has already been offered $2B of new financing by a coalition of creditors, but they're either holding out for a better deal, or afraid that increasing indebtedness will offend Chinese regulators.
Generally agree with the logics. Just out of pure curiosity, would time matter in this kaisa defaulted bond investment? My worries come from: 1 The case in 2015 and the case now is a little different, with more home builders facing credit problems and the operating environment being a little held back this time 2 Kaisa is famous for its special way of development, which features a significantly higher profit rate, a much longer operating cycle, and much less trasparency on its debts and financial profile. The bail-out of Kaisa will more or less take other bigger or state-run home builders to jump in and take kaisa's projects. And the two concerns above will take them longer to think about it. Kaisa and potential buyers may even go through a long way with back and forth. I'm just writing to discuss.