China developer that led the way on debt overhaul at risk again
Sunac cannot rule out a second offshore debt restructuring
JUST over a year ago, Sunac China Holdings became a model for the country’s defaulted developers by clinching the sector’s first major offshore debt restructuring deal. Now, its problems are mounting again.
At a time when Sunac is trying to complete an onshore debt overhaul, questions over whether it will meet looming repayment deadlines are putting its offshore agreement at risk. On top of that, it is now contending with another court petition to wind up.
Sunac said on Friday (Jan 10) that it “can’t rule out” a second offshore debt restructuring. Should the wind-up petition become successful, it may not be able to pay some offshore debt.
The first task for Sunac is to secure support for its proposal to restructure about 15.4 billion yuan (S$2.9 billion) of onshore debt as early as Jan 21, sources familiar have said. Next up is the liquidation hearing in Hong Kong on Mar 19. Later that month, the developer must pay about US$60 million in estimated interest on its restructured dollar notes or face the possibility of a second revamp of its offshore borrowings.
Sunac became one of China’s first distressed developers to restructure its offshore debt in late 2023, about a year and a half after defaulting on a US dollar bond, fuelling optimism that such deals can be done. But its stock and bond prices have now slid to the lowest level in months, as the country’s ongoing housing downturn dims expectations that the company can revive itself.
On top of interest payments, Sunac also has a US$500 million note due on Sep 30, though the maturity can be extended by a year, according to the company’s filing.
A NEWSLETTER FOR YOU
Tuesday, 12 pm
Property Insights
Get an exclusive analysis of real estate and property news in Singapore and beyond.
“Sales in the primary market are clearly not recovering sufficiently for these property developers to meet their ongoing debt servicing needs,” said Justin Ong, a Singapore-based credit analyst at Columbia Threadneedle.
Sunac’s diminishing cash of about 5.4 billion yuan as of June could still cover interest payments for US dollar bonds due by Mar 30, according to Bloomberg Intelligence (BI). Yet, the developer might still choose to suspend payments in favour of a second offshore restructuring, analysts Daniel Fan and Hui Yen Tay said.
A representative for Sunac declined to comment.
Sunac earned plaudits from creditors when it quickly amassed support for its offshore debt restructuring before China’s property crisis intensified last year. But private-sector developers have yet to escape a years-long downturn in the country’s property market, as sales of new homes remain weak and prices continue to fall.
Mounting government support has focused on rekindling demand, rather than resolving liquidity challenges for distressed builders.
Policy aid for developers’ financing from the past year will not reach real estate companies including Sunac, said BI’s Fan. Relaxed funding rules are mostly helping builders with investment properties that can be used as collateral, he added.
Key dates
- Jan 21: Sunac has yet to win bondholders’ approval for an extension on the principal and interest payments for one of its 10 onshore bonds, sources familiar said. It is a 6.8 per cent note that has a 15 per cent instalment due on Dec 9, the sources said, adding that the grace period ends on Jan 21.
- Mar 19: A Hong Kong court is due to hear a liquidation petition from China Cinda HK Asset Management. A similar wind-up petition was filed against Sunac several months after its initial default, but was withdrawn in mid-2023.
- Mar 30: Sunac needs to make an interest payment of about US$60 million in cash on its restructured US dollar notes, according to Bloomberg calculations based on company filings.
- Sep 30: In 2023, Sunac extended part of its offshore debt into six tranches of bonds, including a short-dated tranche A note of US$500 million due Sep 30. The note’s maturity can be extended by a year. BLOOMBERG
Share with us your feedback on BT's products and services
