Chinese property developer Shimao Group announced that more than 50% of its creditors support its offshore restructuring plan after some amendments were made to the terms. The company mentioned in a filing on Wednesday that the amendments include a commitment from controlling shareholders to retain at least 20% of total voting power. Additionally, certain creditors would be compensated in the form of mandatory convertible bonds as a fee for their support. Shimao, which defaulted on USD 11.5 billion of offshore debt in 2022, has been in negotiations with its creditors to refine the terms of the restructuring plan ahead of a liquidation hearing set for December. The group has been trying to reach an agreement that satisfies its creditors while allowing it to move forward with the restructuring process.

Last week, shares of the Shanghai-based developer initially rose by 15% following the announcement but quickly reversed course and dropped as much as 47% as the broader market declined. The Hang Seng Mainland Properties Index fell by nearly 9%, contributing to the downward movement of Shimao's stock. Just a day earlier, Shimao's shares had surged by 153%, marking one of the sector's largest gains as China's stimulus measures and relaxed home-purchase rules boosted market sentiment. In its filing, Shimao also confirmed that the deadline for the early consent fee, an incentive for creditors to support the restructuring plan, would be extended again, this time until 31 October. This fee serves as a way to encourage creditors to back the company's restructuring efforts as it works to resolve its financial issues.

The company's default in 2022 sent shockwaves through the Chinese property market, as Shimao had been considered one of the more financially stable developers in the sector. However, like many other Chinese developers, it struggled with a significant amount of debt, leading to its eventual default on offshore bonds. The restructuring plan has been a crucial step in addressing the company's financial difficulties and ensuring it can continue operating while managing its debt obligations. Despite the challenges faced by Shimao, the support from more than half of its creditors suggests that there is optimism about the restructuring plan. The amendments, particularly the commitment from controlling shareholders to retain voting power, appear to have been well received by many creditors. Furthermore, the use of mandatory convertible bonds as a fee for certain creditors demonstrates a creative approach to compensating stakeholders while managing the company's limited resources.

Shimao's restructuring process comes at a time when the Chinese government has implemented a series of stimulus measures aimed at stabilising the property market and supporting homebuyers. These measures have had a positive impact on sentiment within the sector, as evidenced by the recent surge in Shimao's stock price. However, the broader market remains volatile, and the company still faces significant hurdles as it works to finalise its restructuring plan and emerge from its financial difficulties. As the December liquidation hearing approaches, Shimao will continue to refine the terms of its restructuring plan and negotiate with its creditors to secure the necessary approvals. The extension of the early consent fee deadline to the end of October indicates that the company is still working to build support among its creditors, while also providing additional time for negotiations.

In the coming weeks, Shimao's ability to navigate these challenges will be critical to its future. The support of a majority of its creditors is a positive sign, but the company must continue to work closely with all stakeholders to ensure that the restructuring plan is finalised and approved in time for the December hearing. The outcome of these negotiations will have far-reaching implications not only for Shimao but for the broader Chinese property market, which has been under significant pressure in recent years due to debt concerns and slowing growth.