Chinese developer Sunac proposes debt restructuring

Property giant Sunac China announced plans to restructure debt worth $9.1 billion on Friday, providing hope for the country’s beleaguered real estate sector after it wilted under a regulatory crackdown.

The firm proposed converting up to $4 billion of offshore debt into ordinary shares or equity-linked instruments, according to a filing to the Hong Kong stock exchange.

The rest of the debt will be swapped for new dollar-denominated bonds with maturities ranging from two to eight years, with no interest payments for the first two years, the document said.

Since 2020 Beijing has cracked down on excessive debt in the property sector, leaving major players such as Evergrande and Sunac struggling to make payments and forcing them to renegotiate with creditors as they teetered on the edge of bankruptcy.

The crisis deepened this year after buyers across the country, furious at lagging construction and delayed deliveries of their properties, withheld mortgage payments for homes sold before completion.

Sunac said it was discussing its restructuring bid with a group of creditors holding more than 30 percent of debts, but no definitive agreement has yet been reached.

Beijing has taken steps recently to ease its regulatory crackdown and reverse the huge slump in the market.

In Hong Kong on Friday, Chinese property shares rallied on expectations that Beijing will further prop up the sector at a key economic meeting next week, Bloomberg News reported.

The Hang Seng Properties Index rose by 6.6 percent, with top performers such as China Resources Land and Country Garden spiking by 10.8 and 8.5 percent respectively.

In a separate filing on Friday, Sunac reported a core loss of 25.3 billion yuan ($3.6 billion) for 2021, its first loss since listing in 2010, compared to a core profit of 30 billion yuan the year before.

Revenue fell by 14 percent year-on-year to 198.4 billion yuan, while cash balance fell to 69.2 billion yuan.

The developer missed a March deadline to publish the annual results, which led to a trading suspension at the Hong Kong stock exchange that began in April and remains in force.

China’s real estate market is expected to “rapidly recover and stabilise” in 2023 as the economy picks up, Sunac chair Sun Hongbin said in the earnings report.

But Bloomberg Intelligence analysts said Sunac could face difficulty winning approval from offshore creditors for its proposal.

“Stabilising the company’s liquidity might be hard as revenue has been hit by prospective homebuyers’ fear of non-completion of projects,” the analysts said.

Sunac’s $3.2 billion market capitalisation could shrink by one-third if the stock resumes trading and performs on par with its distressed peers, the analysts added.

Sunac is also working on a restructuring plan for its onshore bonds, Bloomberg reported. — Agence France-Presse