A Hong Kong court has granted approval for Sunac China's $9 billion offshore restructuring plan, marking a significant milestone in the property developer's debt restructuring strategy. This development sets a precedent for other financially strained Chinese property developers grappling with challenges since mid-2021. Sunac confirmed that all scheme conditions have been met, and the scheme became effective on October 5, 2023. Last week, The company's creditors had previously endorsed its debt restructuring plan, involving debt conversion and new notes. While Beijing has implemented support measures, analysts emphasize the need for further actions to facilitate a comprehensive recovery in the sector.
In Hong Kong, a court gave the green light to Sunac China's $9 billion offshore restructuring plan, as stated in a filing by the property developer. This approval signals the last step required for the company to implement its debt restructuring strategy, setting a precedent for other financially strained Chinese property developers in a sector facing challenges since mid-2021.
According to the announcement, as of now, all scheme conditions have been met, and the scheme became effective on October 5, 2023, according to Sunac. Last week, Sunac's shares increased by 6.3%, outperforming the 0.2% rise in the Hang Seng Mainland Properties index. Last month, Sunac's creditors endorsed its $9 billion offshore debt restructuring plan, involving the conversion of a portion of its debt into convertible bonds supported by its Hong Kong entity, along with new notes maturing between two and nine years.
Unlike Sunac, several other developers have not yet finalized agreements with offshore creditors. Since mid-2021, property developers have been grappling with substantial debt, a consequence of government restrictions on speculation. Approximately 40% of Chinese home sales, predominantly involving private property developers, have experienced defaults. While Beijing has implemented various support measures to revive the sector, constituting about a quarter of the world's second-largest economy, analysts assert that additional actions are required for a comprehensive recovery.
China Evergrande Group, at the epicentre of the industry's debt turmoil, recently scrapped the creditor votes for its $31.7 billion offshore debt restructuring plan. The company cited the need for a reassessment of the restructuring terms, attributing it to lower-than-expected home sales. Additionally, last week, Evergrande's primary unit in China faced challenges in issuing new debt, citing an ongoing investigation, which further complicated the restructuring efforts.
"Offshore creditors" typically refers to creditors who are located outside the home country of the entity or company in question. In the context of financial restructuring or debt-related matters, it often involves creditors holding debt issued in a currency other than the domestic currency of the company. These creditors could include international investors, financial institutions, or bondholders who have invested or lent money to the company on the global financial market.
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