HONG KONG (Reuters) - Kaisa Group Holdings Ltd (1638.HK) shares leapt as much as 87 percent on Monday as trading resumed after a 2-year suspension, as the first Chinese property developer to default on offshore bonds hinted at recovery with its first earnings report in 2-1/2 years.
Kaisa's stock has been on hold since being unable to report 2014 earnings after local authorities blocked the sale of some of its properties, rendering the developer incapable of repaying creditors. In its last report for the first half of that year, Kaisa was saddled with $11 billion worth of debt.
Neither the Shenzhen-based firm nor local authorities disclosed reasons behind the sales block, yet its predicament was widely interpreted as highlighting the uncertain operating conditions and amounts of debt that Chinese developers faced.
In updating earnings, trading of Kaisa's Hong Kong-listed shares could resume after being suspended on March 31, 2015. On Monday, the shares hit their highest price since December 2014, at HK$2.92 ($0.38).
"Allowing Kaisa to resume trading means its financial accounts are cleared," said Alvin Cheung, associate director of Prudential Brokerage in Hong Kong. "Within the period Kaisa's been suspended from trading, Chinese property stocks have gained a lot so Kaisa shares are catching up with the broader market."
However those gains may reverse should the developer fail to demonstrate its ability to repay debt, Cheung said.
In reporting earnings on Sunday, Kaisa said aggregate borrowing totaled 87.5 billion yuan ($12.7 billion) at the end of last year, of which about 9 percent was repayable within the year.
That put its net debt ratio at 545 percent versus an industry average of about 70 percent, analysts said.
The earnings showed Kaisa slowly recovered after proposing to restructure debt in 2015, posting record contracted sales of 29.8 billion yuan last year - about 25 percent over its last reported sales in 2013.
Overall for 2016, Kaisa booked a core loss of 4.16 billion yuan, up 2 percent from a year earlier. That compared with the 2.8 billion yuan core profit of 2013.
Kaisa also said it has sufficient working capital for at least 12 months of operation, and has enhanced internal controls to prevent accounting fraud and buttress auditing credibility.
The developer in December had said financial adviser FTI Consulting had found 30.8 billion yuan in misclassified outstanding loan liabilities for 2012-2014.
Kaisa is scheduled to hold a news conference at 0815 GMT to update on its business.
Kaisa owed $2.5 billion to offshore creditors as of last March when it sweetened a debt-restructuring proposal that offered creditors higher coupons and amended payments contingent upon milestones.
Though interest payable at the end of June is $99.5 million, Thomson Reuters data showed, Kaisa will not have to part with cash as the interest is payment-in-kind in the first year following restructuring.
"The group actively facilitated the negotiation of its onshore debts and restructuring of its offshore debts to lift blockages and re-launch projects for sale in major cities," Kaisa said in a statement to Hong Kong's stock exchange on Sunday.
Kaisa plans to repay offshore debt from 2019 after addressing onshore debt over 2017-19.
Its bonds were broadly higher after it announced strong sales on the back of a strong Shenzhen market. Bonds due 2020 KY138798585= were up nearly a point at 100.25/101 cents on the dollar.
"Kaisa was nearly the number one in Shenzhen before the blockade, and Shenzhen home prices have risen a lot, so its cash flow could be able to cover much debt if its sales are OK," said CRIC Hong Kong head of research David Hong ahead of the earnings report.
($1 = 6.8870 Chinese yuan renminbi)
($1 = 7.7670 Hong Kong dollars)
Reporting by Clare Jim and Umesh Desai; Editing by Anne Marie Roantree and Christopher Cushing