Sunac in talks with offshore creditors, working on restructuring plan

By Marisa Wong

Los Angeles, Dec. 9 – Sunac China Holdings Ltd. issued an update on Friday regarding the restructuring of its offshore debt.

The group said it has been actively working with its legal adviser, Sidley Austin, and financial adviser, Houlihan Lokey (China) Ltd., to assess its current financial and operational conditions with a view to formulating a solution that respects the rights of all stakeholders and unlocks the inherent value of the group’s business and assets as the onshore operating environment recovers over time.

The company has been communicating and constructively engaging with certain holders of its senior notes and other offshore debt – excluding holders of certain secured offshore debts which the company intends to deal with on a bilateral basis – with an aggregate principal amount of about $9.1 billion.

The goal of the talks is to formulate a consensual restructuring proposal for the company’s offshore debts.

Holders of the existing debt who have formed an ad hoc group of offshore creditors collectively hold or control more than 30% in aggregate principal amount of the existing debt.

Preliminary framework

The company has proposed to the ad hoc group of creditors a preliminary restructuring framework with the following key elements:

• Deleveraging plan in which the company would convert $3 billion to $4 billion of existing debt and certain shareholder loans into ordinary shares or equity-linked instruments in order to achieve a sustainable capital structure that is capable of being serviced by continuing operations, while also addressing the concerns of offshore creditors. The company is exploring different structures with the ad hoc group to achieve the target deleveraging;

• Exchanging residual existing debts into new dollar-denominated public notes with maturities ranging from two to eight years from the restructuring effective date. The company is proposing that certain interest payable on the new notes can be accrued in the initial two-year period post-restructuring, in order to provide an appropriate period of time for the group to restore its operations and liquidity profile, and after which that interest will be paid in cash;

• Using net proceeds (if any) from the disposal of certain assets as an additional source of funding for the repayment of the new notes; and

• Offering a consent fee for creditors who provide their support to the restructuring proposal.

Next steps

As of the latest announcement, the company is still in discussion with the ad hoc group of creditors on the offshore restructuring proposal, and no definitive agreement on the terms of the offshore restructuring have been entered into between the company and the ad hoc group.

The company said it expects to continue the proactive and constructive dialogue and maintain a positive momentum with the ad hoc group with the goal of finalizing terms of the restructuring proposal as soon as practical.

Trading in shares of the company has been suspended on the Stock Exchange of Hong Kong Ltd. since April 1, 2022.

Sunac is a Tianjin, China-based residential and commercial property developer.

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