Tue Jan 27, 2015 2:58am EST
(Recasts with bond reaction)
By James Pomfret
HONG KONG Jan 27 (Reuters) - Troubled Chinese property developer Kaisa Group failed to remove a local government block on sales at its Shenzhen projects during talks with public officials on Monday, a company source familiar with the discussions said.
Kaisa's top executives held a high-level meeting with senior Shenzhen government officials on Monday afternoon in the Longgang district in northern Shenzhen, where two of Kaisa's new projects are blocked, according to the source.
"There was no progress at all in the meeting," the Kaisa executive said.
A Shenzhen official told homeowners that the government "needs some time to resolve this incident" as the Kaisa case was linked to China's crackdown on corruption, according to the pro-Beijing Wen Wei Po newspaper on Monday, citing a deputy director of a government bureau that deals with public complaints.
The Kaisa source told Reuters he wasn't at the meeting in person but was briefed on the discussions by those who were. Negotiations are continuing.
A Kaisa spokeswoman said she wasn't aware of the talks. Shenzhen's Urban Planning, Land and Resources Commission was not available for comment.
Kaisa is struggling after a string of senior executives left unexpectedly and authorities blocked sales at some of its projects in Shenzhen late last year.
The company failed earlier this month to make a $26 million interest payment on its bonds due to mature in 2020, and now has until Feb 9 to pay that coupon or else become the first Chinese real estate firm to default on its offshore debt.
The source dismissed a report in the Apple Daily newspaper on Tuesday that Shenzhen authorities would end the moratorium on unsold units at several Kaisa projects within two weeks, a prospect that has buoyed investor sentiment in the troubled firm.
"I haven't heard anything about that," the source said.
Kaisa's bond prices came off their day's highs after Reuters reported the company had failed to remove the sales block, traders said.
Kaisa bonds that are due to mature in 2017 < XS082836675=TE> were trading at 62/66 cents on the dollar, off the morning levels of 66/69. It had gained 7 points on the Apple Daily report.
PROTESTS
Kaisa's problems have left buyers of apartments in their upcoming developments unsure as to whether they will get their flats or suffer hefty financial losses if the firm goes bust.
On Saturday, some 2000 Kaisa home buyers wearing white T-shirts with the slogan "I want my home", staged a protest to demand authorities protect their rights.
Police set up barricades preventing protesters from getting close to Shenzhen's government headquarters, as some demonstrators called on authorities to protect their rights amid president Xi Jinping's pledge to fight "tigers and flies" in China's high-profile crackdown on graft.
The source, however, suggested a deeper political dimension that couldn't be easily resolved. "It's a Central Government order to keep the blockage so even the Shenzhen government has no means to resolve this on its own."
Kaisa is also said to be in talks about a possible large equity investment into the company or selling off some of its assets.
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 Tencent Finance 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. (Additional reporting by Clare Jim and Umesh Desai; Editing by Rachel Armstrong)
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