By NIU Yu
Chinese property developer Sunac China told the Hong Kong Stock Exchange Wednesday that restructuring agreements had been reached with overseas creditors holding more than 30 percent of the company’s outstanding offshore debt.
China Evergrande Group, the world's most penniless property developer, last week also announced plans for restructuring its US$22.7 billion in offshore debt. Sunac’s plan allows creditors to choose different options based on their specific demands and limitations.
Building on previous losses
Once among China’s top five developers, Beijing-based Sunac fell harder than most during an exceptional slump in the property market that still seems far from over.
The announcement of the restructuring plan comes 10 months after the developer first defaulted on public dollar bonds and trading in Sunac's Hong Kong-listed shares was halted. By the end of 2021, the builder owed 1 trillion yuan (US$150 billion) at a liability ratio of 89 percent. Over US$9 billion of that debt was unsecured and offshore.
Delays in project delivery have led to a further fall in income. Earlier this year, Sunac extended the maturity on 16 billion yuan of onshore bonds by an average of 3.5 years. This month, Sunac warned of a second year of net losses – more than US$4 billion (28 billion yuan) of them.
New debt for old
The plan sets out details that include the ability to receive equity. Creditors may convert all or part of their debt into shares, or arrange repayment over a longer period. Bondholders can exchange old debt for new, maturing in two to nine years.
Sunac will also have an option of extending the maturity of shorter-dated new notes at an increased interest rate. Creditors can swap Sunac debt for shares in Sunac Services Holdings Ltd. There are also several cash settlement mechanisms.
Chairman SUN Hongbin will continue to own 30 percent of the business after restructuring and will remain its controlling shareholder.
Nine-year extension
The builder has now signed an agreement with a group of investors who hold more than 30 percent of that overseas debt, according to the exchange filing. The creditors will collectively convert existing debt of US$1 billion into an equal value of nine-year convertible bonds.
The bonds can be exchanged for company shares at a price of HK$20 per share in the first 12 months after the restructuring is formally agreed upon by shareholders. Thereafter, the bonds no longer carry conversion rights and will be redeemed on the maturity date.
