By YANG Bingke
In early September, just after Beijing's new housing policy came into force, Sunac China sold luxury properties in Beijing Yihao Courtyard worth 5.6 billion yuan (US$800 million) in a single day. Its stock price increased to as high as HK$3.59 on September 12, compared with HK$1.02 on September 1. Yesterday, Sunac announced the restructuring of nearly US$10 billion of overseas debt, with 2014 out of 2019 bondholders approving the scheme.
When other options are considered, it is expected that the reduction in debt through equity conversion will exceed US$4.5 billion.
Sunac believes that the restructuring will improve the capital structure, reduce debt and alleviate liquidity pressure. In addition, based on the current market conditions, increasing the limit of the mandatory convertible bonds is in line with the overall interests of the company and shareholders.
To ensure that the debt restructuring plan is approved by the courts, Sunac has applied for Chapter 15 certification in the US to obtain the restructuring in Hong Kong. Chapter 15 certification can prevent creditors from using New York law to evade the reorganization terms that have been ruled by the Hong Kong court.
In cases of reorganization involving non-U.S. companies, applying for Chapter 15 certification is a routine procedure. Many real estate companies have obtained Chapter 15 certification in the process of USD debt restructuring. Sunac had completed restructuring domestic debt in January of this year.
In Sunac's view, selling core assets at a low price in e special market conditions will affect long-term delivery and debt repayment. Protecting the value of core assets can provide a good foundation for recovery.
