MORE RESTRUCTURING POSSIBLE
Its liquidation petition comes as weak home sales in China raise the prospect of a new round of offshore debt restructuring in the property sector.
Sunac, which prior to the debt crisis that jolted the property sector in 2021 ranked among China’s top developers by sales, was the first to complete a comprehensive overhaul of its US$9 billion offshore debt in November 2023 after facing a liquidation petition in 2022 that was ultimately withdrawn.
Reuters reported this week that Sunac has informed some of its offshore creditors it is unlikely to meet a September maturity deadline for its restructured bonds, due to uncertainties in the sector’s sales recovery that could affect its ability to repay.
“I’m not surprised by the petition,” said Alvin Cheung, associate director of Prudential Brokerage Ltd in Hong Kong. “Chinese developers are not making much money, while they have to keep repaying a lot of debt.”
Sunac, which had total borrowings of 277.4 billion yuan (US$37.83 billion) as of the end of June according to its interim financial results, is also working to restructure US$2.1 billion of yuan-denominated bonds.
Stocks across the property sector were down on Friday, with Cheung pointing to investors being increasingly concerned about further defaults.
Shares in Shimao Group and Agile Group both slipped more than 9 per cent, while those in CIFI Holdings shed 8%.
Beijing has rolled out a raft of measures over the past year to revive the country’s economically crucial property sector, but the measures have had little impact on homebuyer confidence in the world’s second-largest economy.
Country Garden, a major developer that defaulted on its around US$16.4 billion of offshore debt in 2023, said on Thursday it has proposed a deal to its offshore creditors that would cut its debt by 70 per cent in a restructuring. The proposal includes options for creditors such as converting bonds into cash with a 90 per cent haircut or receiving new debt instruments with delayed maturity
