Sunac Found Kaisa Had Zero Net Asset Value During Talks; Sunac’s Sun: While PwC found “a little” net value on Kaisa’s books, “in our understanding, its net assets are basically zero. I stand accountable for this conclusion.”

Sunac Found Kaisa Had Zero Net Asset Value During Talks

June 18, 2015 — 5:03 PM SGTUpdated on June 18, 2015 — 6:06 PM SGT

Sunac China Holdings Ltd., the developer that last month dropped its acquisition of Kaisa Group Holdings Ltd., said it found the troubled developer’s net asset value was zero. The zero value discovered during the acquisition process was Sunac’s judgement and different from Kaisa’s auditor PricewaterhouseCoopers LLP, Chairman Sun Hongbin said in Beijing on Thursday. While PwC found “a little” net value on Kaisa’s books, “in our understanding, its net assets are basically zero,” Sun said. “I stand accountable for this conclusion.”Frank Chen, an investor relations representative at Kaisa, said the company can’t comment on valuations done by another firm and Kaisa is still working on releasing its delayed financial results. A spokesman for PwC in Hong Kong couldn’t immediately comment.

Sun on May 28 dropped his proposed acquisition of Kaisa after talks with the Shenzhen-based homebuilder’s offshore bondholders on debt payments stalled and Kaisa founder Kwok Ying Shing unexpectedly returned as chairman. The decision was “sensible” and deserves credit from investors, Sun said at the time.

While Sunac found it “very difficult” to win a regulatory waiver to acquire Kaisa without the latter having published its annual report, his decision was based on the judgment that the developer was “no longer worth buying,” Sunac said on Thursday.

‘Not Worth Buying’

Kaisa has delayed the release of its 2014 results to give auditors more time to verify its accounts. The company has said it made a loss last year, revising an earlier forecast of a profit.

Sun said he told a friend, who owns Kaisa shares and asked his opinion, to sell them as soon as they resume trading. The shares have been suspended since the end of March.

Four Kaisa projects in Shanghai that Sunac initially purchased were “not worth buying” either, Sun said, citing the assets’ complicated debts. Sunac signed the purchase agreement amid opposition from its Shanghai unit, in a bid to inject much-needed liquidity into Kaisa, he said.

Buy Sunac

Kaisa, which was involved in an anti-graft probe, in April became the first Chinese developer to default on U.S. dollar debt after Sunac abandoned the acquisition on May 28.

Kaisa has no plan to introduce new equity investors at the moment as its founder only recently returned, the company’s chief of restructuring, Tam Lai Ling, said June 12.

The top priority is to lift a sales blockage on the developer’s Shenzhen projects as soon as possible so it can sell apartments and generate cash, he said. Tam is leading the restructuring of the company’s debt of 65 billion yuan ($10.5 billion).

Among seven analysts tracked by Bloomberg who have issued ratings on Sunac since it walked away from the deal, six have rated the stock a buy.

Sunac shares closed 0.6 percent higher at HK$9.01 in Hong Kong. They have declined 2.1 percent since it dropped the acquisition on May 28, while the Hang Seng China Enterprises Index is down 6.5 percent in the period.

Kaisa’s $800 million of 8.875 percent bonds due 2018 dropped 0.18 cents to 63.895 cents on the dollar on Thursday, the lowest since beginning of June, according to Bloomberg-compiled prices.


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