By Esther Fung 

BEIJING--Troubled Chinese property developer Kaisa Group Holdings Ltd. could face a fight with its offshore creditors, analysts said, after offering restructuring terms on $2.5 billion in debt that would leave them worse off than Chinese lenders.

Kaisa, in a conference call with offshore creditors and analysts on Monday morning, reiterated its proposed terms for offshore creditors and highlighted the threat of a liquidation. It said offshore creditors would recover only 2.4% of their investment if a rescue deal with another property developer fails.

Offshore creditors "may not accept the first offer, and I expect there will be some negotiation," said Standard & Poor's credit analyst Christopher Lee. "At face value, the terms offered to both onshore and offshore creditors appear to be similar, but the offshore creditors are worse off."

Brandon Gale, a senior vice president at Houlihan Lokey, Kaisa's financial adviser, said they were "getting feedback" from the creditors, and declined to give additional details. Neil McDonald, a partner at the law firm Kirkland and Ellis, who is representing offshore creditors in negotiations with Kaisa, didn't respond to requests for comment.

Standard & Poor's said Monday that it will downgrade junk-rated Kaisa and lower the ratings on its outstanding notes if the company completes the restructuring of offshore debt under current proposed terms. Kaisa's notes, which are currently rated "CC," could be downgraded to "D", as S&P views the current terms as a "distressed exchange offer."

The terms, disclosed in a filing to the Hong Kong Stock Exchange late Sunday, included cutting the interest rates on six issuances of bonds and convertible bonds by as much as two-thirds and an extension of maturities by five years. While offshore creditors are structurally subordinate to onshore creditors, some analysts said that the terms offered to the former seemed disproportionate.

"Kaisa is facing liquidity rather than insolvency issues," said Glenn Ko, an analyst at UBS Global Research in a note. "Hence, we are surprised to see the five-year maturity extension across the board and consider the extension not necessary."

Kaisa has asked the offshore bondholders to approve the restructuring by March 20.

Last week, Kaisa said it is looking to extend maturity on Chinese onshore debt by three to six years and cuts to coupon payments to a floor of 70% of the base rate set by the People's Bank of China, China's central bank. The PBOC's one-year benchmark lending rate is currently 5.35%.

"It appears the creditors are forced to take a longer view as they'd have to remain invested in the firm for 10 years," said Mr. Lee.

Some offshore creditors are betting on the possibility that Kaisa could sweeten its restructuring offer to complete the rescue from the other property developer. Sunac China Holdings Ltd. plans to acquire 49.25% of Kaisa for 4.55 billion Hong Kong dollars, and then buy the rest from investors--a plan that Kaisa says hinges on its ability to restructure its debt.

"It's the opening round, and it's a game of chicken," said one lawyer who has knowledge of the discussion among creditors.

More than two dozen foreign fund companies, ranging from BlackRock Inc. to Fidelity Investments, owned Kaisa debt in recent months, according to Thomson Reuters, but it isn't clear how many currently hold the debt. BlackRock and Fidelity declined to comment on Monday.

Kaisa said that its total cash balance has decreased to 1.9 billion yuan as of March 2 from 10.9 billion yuan from June 2014, due to the sale blockages and asset freezes. The company said that it will run out of cash by the middle of 2015.

Kaisa's woes started late last year, when the Shenzhen authorities blocked sales of its projects without providing a reason, and numerous senior executives later resigned, including chairman Kwok Ying Shing. Many creditors demanded early repayment of debt after his resignation, and local courts have blocked the sale or frozen 22 of the firm's projects and bank accounts following litigation proceedings from its creditors.

The property developer had announced sharply-higher debt levels at the end of December 2014 at 65 billion yuan, more than doubling the 30 billion yuan recorded in late June 2014.

Kaisa's dollar-denominated bond due 2017 fell 8 cents to 51.4 cents on the dollar, while its shares fell as much as 3.7% to HK$1.57 during intraday trading Monday, before ending at HK$1.58.

Anjie Zheng in Hong Kong Contributed to This Article

Write to Esther Fung at esther.fung@wsj.com<mailto:esther.fung@wsj.com>

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