(Yicai) Nov. 6 — Sunac China Holdings has received approval by the court to convert its offshore bonds worth a total of USD9.6 billion into shares, with the restructuring plan expected to free the property developer of all its debts upon completion.
The offshore debt restructuring scheme was sanctioned by the High Court of Hong Kong, with the sanction order already delivered for registration, the Tianjin-based company announced yesterday.
The scheme was first proposed in April and included the issuance of two mandatory convertible bonds, encouraging all offshore creditors to become Sunac shareholders. The support rate was 75 percent by June and 98.5 percent in October.
This approval will likely make Sunac the first major Chinese builder to complete its offshore debt restructuring process since the real estate crisis began in 2021.
Sunac’s first restructuring plan adopted the ‘debt reduction plus extension’ approach, but failed to help the firm completely overcome its debt crisis because of the continuous deep adjustment in the property market. On the contrary, this latest one focuses on the ‘debt-to-equity conversion’ strategy, which can rapidly reduce the debt burden.
Despite the news, Sunac’s shares [HKG: 1918] were trading unchanged at HKD1.49 (19 US cents) as of 1.45 p.m. in Hong Kong today, after earlier gaining as much as 3.4 percent.
In January, Sunac secured a deal to halve its CNY15.4 billion (USD2.1 billion) onshore debt. The firm said it would rearrange the principal and interest repayments for all 10 bonds after their holders agreed to its second onshore debt restructuring plan.
Chinese real estate firms facing debt crises still experience pressure to adjust their balance sheet, even after completing debt restructurings, according to the China Index Academy.
Therefore, some of them have shifted their focus towards light asset businesses and the development of services, such as construction management, property management, and asset management. This strategy aims to help developers restore their self-sustaining capabilities at the lowest possible cost.
Sunac is expected to achieve its annual sales target of over 50,000 new homes this year, according to data previously released by the company. Its luxury project One Sino Park in Shanghai’s central Huangpu district has logged a cumulative sales amount of over CNY22 billion (USD3 billion) since the beginning of the year.
Moreover, Sunac’s construction management platform ranked 15th in the industry by newly signed construction contracts in the first three quarters of the year.
Between 2009 and 2014, Sunac grew quickly from a mid-sized builder to the top 10 in the industry. But that came with hidden risks. The company defaulted on its debts in May 2022, after the real estate market entered into a crisis. In November 2023, it completed its first onshore and offshore debt restructurings, involving about CNY90 billion (USD12.6 billion).
Editors: Tang Shihua, Futura Costaglione