By Clare Jim
HONG KONG (Reuters) -China Sunac has become the first Chinese property developer to plan a second restructuring of its offshore debt.
The company said in a filing on Monday it would seek a more comprehensive debt solution “to address its current offshore debt risks”, citing the impact of a liquidation petition against the company, and weak market conditions.
It has appointed Houlihan Lokey and Sidley Austin as its financial and legal advisors, respectively, it said.
Earlier in the day, the lawyer of a unit of state-owned asset manager Cinda told a Hong Kong court Sunac had informed it about the restructuring intention.
Cinda (HK) filed a liquidation petition this year against Sunac over the non-payment of a $30 million loan.
The petition surprised many in the market because Sunac completed a $9 billion offshore debt restructuring in 2023, the first developer in China’s property sector to do so since the debt crisis that began in 2021.
Once accounting for a quarter of China’s GDP, the sector has struggled to recover from a liquidity crisis triggered by a regulatory crackdown on developer debt, leaving projects unfinished and buyers wary.
A lawyer for Cinda, Thomas Wong of Temple Chambers, sought an immediate liquidation of Sunac in Monday’s hearing, saying the developer had not provided any documents of a new restructuring plan. The hearing was adjourned to April 28 to allow Sunac to present its progress.
The company had informed some of its dollar creditors it was unlikely to meet a September deadline for its first tranche of restructured notes, Reuters reported in January.
Cinda’s $30 million loan is expected to be included in the second restructuring, Wong told Reuters outside the court. It was not included in the first round. The company hasn’t disclosed when the loan was due.
Sunac declined to comment.
OFFSHORE BATTLE
Sunac had total borrowings, including onshore and offshore, of 227.43 billion yuan ($38.23 billion) as of end-June. It had total cash of 25.7 billion yuan.
It restructured $2.1 billion worth of onshore bonds late last year and cut the debt by more than half. It still needs to negotiate restructuring terms with creditors on other onshore loans.
Cinda, which is also a major lender to Sunac in mainland China, is using the Hong Kong petition to raise its bargaining power for negotiations on both its onshore and offshore loans, according to two people familiar with the situation. They declined to be named due to the sensitivity of the issue.
Cinda did not immediately respond to a request for comment.
Weighed down by weak sales and a lack of new funding channels in a prolonged property downturn, Chinese developers have been instructed by authorities to focus on completing homes for buyers and repaying onshore creditors, developers say.
Some are now rethinking their offshore repayments, industry sources and advisers say. Depending on the company and creditors, offshore and onshore debt can be dealt with quite separately.
Some developers may want to forgo an offshore restructuring now because “after spending so much time and money on it, the company could still be wound up,” said Foreky Wong, founding partner of advisory firm Fortune Ark Restructuring.
“So perhaps it is better to focus their resources on just onshore restructuring.”
($1 = 7.2288 yuan)
(Reporting by Clare Jim; Editing by Rachna Uppal)
