Strategic Consideration: Sunac China Holdings is preparing to roll out a four-point plan to restructure CNY 15.4bn (USD 2.16bn) of onshore bonds, offering a mix of cash against an 85% haircut, swapping debt to offshore equity, an exchange for LGFV payables-backed debt, and a long-term bond extension. The plan was discussed with some bondholders last week and could be formally presented to all creditors as early as this month. If successful, Sunac would become the first Chinese developer to complete a comprehensive restructuring of its onshore debt since the country's real estate debt crisis began in 2021. Sunac is the only distressed Chinese developer to date to complete an offshore debt restructuring, which took effect almost a year ago.
- Sunac plans to offer a cash payment capped at CNY 800m (USD 112.3m) against CNY 5bn (USD 701.9m) of outstanding bonds, representing an 85% haircut
- Around CNY 3bn (USD 421.1m) in onshore debt is proposed to be converted into economic interests in Sunac’s Hong Kong-listed shares
- Another CNY 3bn (USD 421.1m) of debt would be exchanged for Zhangjiakou LGFV-backed obligations through a trust at a 65% discount
- The remaining bond principal of about CNY 5bn (701.9m) would be converted into a 9.5-year bond paying a 1% coupon
融创境内债务重组草案包括现金削债、债转股以及政府应收账款抵债
战略考量：融创中国控股计划推出一个包括四种偿债选项的债务重组方案，以重组总额为人民币154亿元（21.6亿美元）的在岸人民币债券。具体方案包括提供现金支付（对债务进行85%的削减）、将债务置换为离岸股权、交换为地方政府支持的债务，以及留债展期。本计划上周已与部分债权人进行讨论，并有望最早在本月正式提交给所有债权人。若成功实施，融创将成为2021年中国房地产债务危机开始以来首家完成在岸债务全面重组的中国开发商。融创也是迄今唯一一家完成离岸债务重组的陷入困境的中国开发商，该重组已于几乎一年前生效。
- 融创计划提供最高人民币8亿元（1.123亿美元）的现金支付，用于人民币50亿元（7.019亿美元）的未偿债务，相当于85%的削减比例
- 约人民币30亿元（4.211亿美元）的在岸债务将被转换为融创在香港上市股份的收益权
- 另有约人民币30亿元（4.211亿美元）的债务将通过信托的方式打3.5折转换为有地方政府支持的债务
- 剩余债券本金约人民币50亿元（7.019亿美元）将转换为一笔期限为9.5年、票息为1%的债券
Sunac China Holdings’ long-awaited onshore debt restructuring plan will likely offer bondholders four options including a cash payout with an 85% haircut, according to a source and three persons briefed by the company. Other options are a debt-to-equity swap, an LGFV payables-backed debt exchange, and a 9.5-year bond rollover, they added.
The Chinese developer last week discussed its plan to restructure about CNY 15.4bn (USD 2.16bn at today’s exchange rate) of onshore notes with some major bondholders but has yet to formally present it to all bondholders, the source and the three persons said. The plan could be finalized and presented as early as this month, according to the source.
Sunac did not respond to a request for comment by press time.
The first option would offer a cash payout capped at CNY 800m (USD 112.3m) for debt with principal amount totaling CNY 5bn (USD 701.9m), amounting to an 85% haircut, all four said. Under the second option, around CNY 3bn (USD 421.1m) of onshore debt could be converted into economic interests of Sunac’s shares listed in Hong Kong, the four added.
The conversion price for the debt-to-equity swap is proposed to be set between HKD 8-10 (USD 1.03-1.29) per share, with the aim of conversion into 300m to 400m shares, according to the source and one of the persons briefed by the company. To overcome the challenge of swapping onshore debt for offshore equity, Sunac is considering enabling onshore creditors to claim returns periodically via a trust or custodial security structure, avoiding complications of direct ownership, the first person and another person briefed by the company said, adding that such arrangements would be subject to regulatory approvals.
The third option would allow bondholders to exchange debt for local government-backed obligations linked to around CNY 1.4bn (USD 196.5m) of payables owed to Sunac by a local government financing vehicle (LGFV) in Zhangjiakou, Hebei Province. This would address about CNY 3bn (USD 421.1m) in principal amount of debt and the exchange would be conducted through a newly established trust fund where each CNY 100 of the principal amount of the bonds would be converted into a CNY 35 four-year trust entitlement, according to the source and the persons briefed by the company.
The fourth option would restructure the remaining bond principal of approximately CNY 5bn (701.9m) into a 9.5-year bond paying a 1% coupon, the source and the persons said, adding that principal repayment would start in the fifth year when the company would pay 1% to 2% of the principal amount.
REDD first reported on 18 October that Sunac was considering a debt-to-equity swap and would aim to convert onshore debt into offshore shares. If successful, the developer would become the first Chinese company to complete a restructuring that involved the conversion of onshore debt into offshore shares.
If successful, Sunac would become the first Chinese developer to complete a comprehensive restructuring of its onshore debt since the country's real estate debt crisis began in 2021. So far, developers such as Sino-Ocean Group Holding, and China Evergrande Group have primarily resorted to extending bond maturities incrementally, as reported.
Sunac, for instance, has been rolling over CNY 15.4bn (USD 2.16bn) in onshore bonds since January 2023. The developer said in a 17 October stock exchange announcement it had extended all onshore bond payments due in the first half and third quarter of 2024 to the end of the year.
Similarly, Sunac is the only distressed Chinese developer to complete an offshore debt restructuring to date. On 21 November 2023, Sunac announced that its USD 10bn offshore restructuring had taken effect after meeting all conditions. As part of this agreement, Sunac transferred a 14.7% stake in its property management arm, Sunac Services, in exchange for USD 775.2m in creditor claims, as reported.
Sunac’s USD 500m 5% notes due September 2025 were indicated at 17.05 bid on Monday (4 November), according to ICE Data Services.
by Phoebe Peng and Gary Guo