By Esther Fung 

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

Kaisa, in a conference call with offshore creditors and analysts on Monday morning, reiterated terms for offshore creditors it proposed on Sunday 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, Sunac China Holdings Ltd., 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."

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.

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 Kaisa--the company is already rated below investment grade--and lower the ratings on its outstanding notes if it completes the restructuring of offshore debt under the current proposed terms. Kaisa's notes, which are currently rated "CC," could be downgraded to "D" because 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, include cutting the interest rates on six issuances of bonds and convertible bonds by as much as two-thirds and extending the maturities of the debt by five years. While offshore creditors stand behind onshore creditors in the line to get their money, 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 was looking to extend maturities on its Chinese onshore debt by three to six years, and to reduce 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 Sunac China. The developer plans to acquire 49.25% of Kaisa for 4.55 billion Hong Kong dollars (US$586 million) 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.

Kaisa's woes started late last year, when authorities in Shenzhen, where the company is based, blocked sales of properties in a number of its projects in the southern city, without providing a reason. Numerous senior executives later resigned, including Chairman Kwok Ying Shing.

Many creditors demanded early repayment of debt after his resignation. In response to litigation by the lenders, local courts in cities across China have blocked sales or frozen 22 of the firm's projects and bank accounts.

Kaisa said that its total cash balance has declined to 1.9 billion yuan (US$303 million) as of March 2 from 10.9 billion yuan in June, due to the sale blockages and asset freezes. The company said that it will run out of cash by the middle of 2015.

In December, the property developer said it had 65 billion yuan of debt, more than double the 30 billion yuan it had in late June.

A dollar-denominated Kaisa 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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