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Kaisa's auditor resigns; company sets timetable for trading resumption

Kaisa GroupHoldings Ltd. auditor PricewaterhouseCoopers has resigned, notingthat it could not get "satisfactory explanation and evidence" tocomplete the audit of the company's finances.

The Shenzhen-based homebuilder, which became the firstChinese developer to default on its U.S. dollar debt in April 2015, saidseparately that it planned to resumetrading on the Hong Kong stock exchange in January 2017.

Kaisa said in a July 15 news release that it expects topublish the results of the audit, as well as its financial results for the lasttwo years ended Dec. 31, 2015, by December.

Kaisa also expects its public to be restored by year-end.

The company published an extract of PriceWaterhouseCoopers'June 24 resignation letter in a separate July 15 release. The accounting firmsaid that in the course of its investigation of the financial statements for theyear ended Dec. 31, 2014, it discovered undisclosed agreements with thirdparties that resulted in about 24.08 billion Chinese yuan worth ofnoninterest-bearing liabilities being reclassified as borrowings. It also saidit could not reconcile the sources of certain cash payments with the receiptsprovided, and that "the balances were not supported by legitimatedocumentary evidence."

The firm also said company management was unable to provideit with "satisfactory explanations or adequate evidence" for thecommercial justification of the sale of subsidiaries in Dongguan and Huizhoufor 559.4 million yuan, and that it was unable to explain why it re-designatedproceeds of 760.8 million yuan, which were originally recorded as amounts dueto certain contracting parties, as other payables due to "alleged thirdparties."

PriceWaterhouseCoopers also said there were a number ofunresolved matters that it believes would have had a significant impact on itsaudit of the 2014 financial statement, including property projects that wereblocked and uncertainties related to the company's ability to continue as agoing concern.

Grant Thornton Hong Kong Ltd. was appointed to fill thecasual vacancy from June 24 until the conclusion of the company's annualgeneral meeting.

Kaisa said July 15 that it expects the audit will be signedoff on by September.

As of July 15, US$1was equivalent to 6.69 Chinese yuan.