According to Caixin, auditing firm Pricewaterhouse Coopers (PwC) examined Kaisa Group Holdings’ assets on behalf of the Guangdong provincial government to analyze the company’s financial situation. Kaisa is one of a raft of liquidity-squeezed property developers in China.
PwC has requested Kaisa entities to submit project information such as loan contract documents, but no significant audits or site checks have been executed yet.
A person close to Kaisa said, “The ongoing audit is seemingly not a thorough one. Instead, it’s just for some special purpose. The government wants to determine whether Kaisa is solvent.”
Although the audit’s findings have not been made public, authorities have temporarily agreed that Kaisa has the financial wherewithal to pay its loans.
In October 2021, Kaisa’s troubling financial states were exposed when the company abruptly postponed investor meetings, making its dollar bonds decrease. A month later, Kaisa failed to make payments on wealth management products it had guaranteed.
Kaisa’s ability to secure additional capital and sell projects was further hampered by speculations about its financial hardship, exacerbating its liquidity crisis.
According to the company’s financial report, Kaisa had total assets of 319.1 billion yuan (about 50 billion USD) as of the end of June 2021, with liabilities of 237.7 billion yuan (about 37 billion USD). Kaisa also has significant off-balance sheet liabilities that are difficult to estimate.
Kaisa has increased asset sales to raise funds. The corporation is attempting to sell 18 properties in Shenzhen, most of which are urban redevelopment projects, for 81.8 billion yuan (about 13 billion USD). Last November, the list of its on-sale projects was enlarged to 25, but no agreement has been reached.
The Guangdong government had taken steps to assist Kaisa and other cash-strapped developers in approaching potential state-backed buyers.
Besides, Kaisa has also contacted other developers, including Yuexiu Property, China Poly Group, and Gemdale Group, for asset sales.