HONG KONG (Reuters) – Deals reached by Chinese developers Sunac and Country Garden with their creditors have brought some relief to China’s property sector, but the sector’s outlook remains clouded by weak home sales.
On the Hong Kong Stock Exchange, Sunac China Holdings shares jumped 14% in early trading Tuesday, after creditors approved its plan to restructure $9 billion in offshore debt, the first such deal by a major Chinese developer.
The stock, however, erased its gains to close down 4.3%, penalized by information citing court documents according to which Sunac filed for protection under the American bankruptcy law under Chapter 15.
Under the US bankruptcy code, this measure protects non-US companies undergoing restructuring from creditors who would like to sue them or block assets in the United States.
This measure is considered a procedural formality in the restructuring processes of large offshore debts.
China Evergrande Group, which is seeking to restructure a total of $31.7 billion in debt, also filed for Chapter 15 protection last month.
At the same time, the other cash-starved developer Country Garden has obtained agreement from its creditors to spread the repayment of an onshore bond, with the group having requested payment extensions for a total of eight bonds, said Tuesday two sources familiar with the subject.
The developments come as Beijing steps up efforts to revive the real estate sector, which accounts for about a quarter of the world’s second-largest economy.
Sunac said on Monday that creditors holding 98.3% of the total value of the bonds concerned participated in the vote and approved the proposed restructuring plan, already accepted by some creditors in March.
The developer will seek approval of the plan from a Hong Kong court at a hearing scheduled for October 5.
As part of the restructuring, part of its debt would be exchanged for convertible bonds backed by its Hong Kong-listed shares, as well as new bonds with maturities between two and nine years.
“I see this as a positive… We haven’t seen much progress in the offshore market, so it shows that at least some Chinese developers are trying to reach an agreement,” said Gary Ng, economist at Natixis Corporate and Investment Bank.
If the plan is implemented and the recovery of China’s real estate market can generate sufficient cash flow, investors will be able to recoup part of their investment, he added.
While Sunac is one of a series of Chinese developers that have defaulted on bond coupons, Country Garden has yet to miss any payments on offshore securities.
The latest agreements reached with creditors will give Chinese developers some breathing room and help them avoid default or a complicated liquidation procedure, but the success of these agreements will depend on the recovery of the real estate sector.
Some offshore bondholders say they have few options other than accepting debt restructuring proposals, given that returns would likely be very low if they chose to liquidate a debt-starved developer’s debt. liquidity.
Even as Beijing implements measures to support the sector, property prices have continued to fall: the latest data shows that new home prices fell at their fastest rate in 10 months in August, while the decline in investment and sales in real estate has deepened.
The support measures could stimulate some “real demand”, particularly before the traditional sales season in late September/early October in major cities, observes Betty Wang, economist at ANZ in China. “However, the pace and scale of such a reversal will be much less than in previous cycles,” she said in a report released Tuesday.
“It is also questionable whether this will kick-start a sustainable rebound, especially given the uncertain employment outlook, deteriorating household incomes, wait-and-see attitude and potential increase in unemployment. “long-term housing supply.”
(Reporting by Donny Kwok and Xie Yu in Hong Kong, Steven Bian in Shanghai, Kevin Huang in Beijing; writing by Anne Marie Roantree and Sumeet Chatterjee, by Corentin Chappron, edited by Blandine Hénault)
Copyright © 2023 Thomson Reuters
I have over 8 years of experience working in the news industry. I have worked as a reporter, editor, and now managing editor at 247 News Agency. I am responsible for the day-to-day operations of the news website and overseeing all of the content that is published. I also write a column for the website, covering mostly market news.