Shares of Chinese real-estate companies led the Hong Kong market’s upturn Friday, as Sunac China Holdings Ltd. unveiled progress in restructuring its debt that could bode well for other highly leveraged private developers.
Among blue chips, China Resources Land Ltd.
Longfor Group Holdings Ltd.
China Overseas Land & Investment Ltd.
and Country Garden Holdings Co.
were some of the top gainers, adding between 7.3% and 10% by the midday trading break. The Hang Seng Mainland Properties index gained 7.3%, outshining the benchmark Hang Seng Index’s
Tianjin-based Sunac — once viewed as one of China’s strongest private developers before a weakening economy and tighter liquidity conditions left it and others in the sector exposed to high levels of debt — said Friday morning that it has made “significant progress in formulating a restructuring framework” with offshore creditors.
Sunac, which defaulted on a U.S. dollar-denominated bond in May, outlined a framework that included a deleveraging plan to convert US$3 billion-US$4 billion of existing debt into ordinary shares. Other debt will also be exchanged for newly issued USD public notes with maturities of two to eight years, Sunac said.
Sunac added that the principal amount of its offshore interest-bearing debt stood at US$11 billion as of end-June, little changed from end-2021 levels. Its shares have been on halt since April, as it failed to publish its annual results on time.
The preliminary plan shows that “offshore investors are now willing to accept [debt] extension and new notes to replace the old notes even for this kind of high risk and highly leveraged developers,” an analyst at a Chinese investment bank said.
He added that “bankruptcy risk or liquidity issue will fade out very, very soon,” and that the real-estate sector “still has to reprice a lot even after the latest rebound.”
China Evergrande Group
the world’s most indebted property developer, is also working on a debt restructuring plan that it aims to complete by the end of the year.
Chinese property stocks have gained ground since the start of November, as the government rolled out measures to help with bond and equity financing. An easing of Covid-19 curbs is also fanning hopes of revived home sales after a prolonged slump.
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