Kaisa's bonds rise on reports of buyout from rival

Chinese property company Kaisa Group saw its bond price bounce on Monday due to optimism that a rival developer might take a stake in the embattled real estate firm.

Kaisa failed on January 8 to make a $26 million interest payment on its bonds due to mature in 2020.

It is now in a grace period, and has until February 9 to pay that coupon or else become the first Chinese real estate firm to default on its offshore debt.

Last week, a source told Reuters a number of developers have approached the company about possibly buying some of its holdings.

The chatter resumed on Monday after financial news website finance.qq.com reported that Sunac China Holdings, which last month terminated a deal to acquire a majority stake in developer Greentown China Holdings, is in talks to buy part of Kaisa.

The report said that Sunac carried out due diligence on Kaisa over the weekend.

Neither Sunac nor Kaisa was available to comment on the report.

Kaisa's bonds were trading up by as much as 3.5 cents on the dollar across maturities by early afternoon on Monday after opening down by a similar amount.

Traders said that if Kaisa were to have a new controlling shareholder, then some bondholders might be able to take advantage of a "change of control" clause, which would mean the company would have to offer to repurchase the bonds at a price equal to at least 101 percent of their principal amount.

"This is a company which has decent assets, so it's not a usual China default where bondholders will get shoddy treatment," said a Singapore-based bond trader.

"It is becoming clear that a buyout is being orchestrated and I don't think bondholders are getting a haircut."

Still, some analysts are hesitant about the enforceability of bondholders claims, and said it may create unnecessary conflict with the company as it tries to restructure its debt.

"Academically, you can exercise the put option but practically bondholders may not want to create more trouble which could impact any resolution. They may just want to keep the bond and keep the bond going," said a Hong Kong-based analyst.