Sunac China, a leading property developer, is executing an unprecedented restructuring plan to cut its 15.4 billion yuan ($2.12 billion) onshore bond debt by over 50%. Two out of ten bonds have already gained bondholder approval, with voting for the rest extended to December 23rd. The plan offers four innovative options, including swapping debt for income rights to Sunac's Hong Kong-listed shares-a first in China's bond restructuring history. Other options involve upfront cash with extended maturities, discounted bond purchases, or repayment from a land sale. This strategy highlights Sunac's effort to balance bondholder recovery with its financial struggles amidst China's property sector challenges.
Sunac China, a major Chinese property developer has made significant progress in its ambitious bond debt restructuring plan, receiving approval from some of its bondholders for a strategy that would reduce its onshore bond debt by more than 50%. Two out of ten onshore bonds involved in the restructuring have already gained sufficient support from holders, with the company extending the voting deadline for the remaining bonds to December 23rd.
This restructuring is notable as Sunac is the first Chinese property developer to attempt such a dramatic debt reduction on its 15.4 billion YUAN (USD 2.12 billion) onshore bonds. The company's journey to this point has been complex, having initially restructured its onshore bonds in late 2022 by extending all coupon and principal payments. By June, the developer began delaying payments, citing unprecedented cashflow pressures that exceeded their expectations. The restructuring proposal offers bondholders four distinctive options, representing an innovative approach to debt management. The most unique option involves swapping debt for economic income rights to Sunac's Hong Kong-listed shares, a first in onshore bond restructuring.
Another option provides bondholders with 1% upfront cash plus accrued interest by the end of 2025, with new notes carrying a 1% coupon and maturities extending up to 9.5 years. Notably, the first principal payment under this option would be deferred until the fifth year. The two additional options include purchasing existing bonds at 20% of their nominal value and accepting repayment from the planned sale of a specific land parcel. This multi-faceted approach demonstrates the company's attempt to provide flexibility and potential value to its bondholders during a challenging financial period.
The original voting process was notably brief, initially giving bondholders only eight working days to review and respond to the refined proposal. This limited timeframe contrasts with the approach of most other developers who have typically only extended bond maturities rather than implementing comprehensive restructuring with debt reduction options.
The restructuring reflects the ongoing challenges in China's property sector where developers like Sunac are navigating complex financial landscapes. By offering multiple restructuring paths, Sunac is attempting to find a balanced solution that can provide some recovery for bondholders while addressing the company's significant financial constraints.
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