Chinese property developer Sino-Ocean Group has suspended payments on all its offshore debt, including almost US$4 billion of dollar-denominated bonds, to embark on a “holistic debt management” in yet another sign the nation’s housing market is mired in distress.
The company is seeking consents from bondholders to extend the maturity of three dollar bonds due between 2024 and 2029, while freezing payments on all its offshore borrowings, according to an exchange filing on Friday. Trading in the securities and its stock was halted on the announcement.
Sino-Ocean had 91.9 billion yuan (US$12.7 billion) of borrowings on June 30, according to its latest interim report to shareholders published earlier this week, of which 49 per cent were due within 12 months. Some 43 per cent of the total borrowings were denominated in foreign currencies, it said.
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China’s “three red lines” policy, introduced in August 2020 to curb excessive debt in the industry, has instead triggered a liquidity crunch and US$29 billion of defaults. Since China Evergrande Group stumbled two years ago, new victims have emerged. Country Garden Holdings, once China’s biggest home builder and the industry’s gold standard, this month reached out to creditors to delay its debt obligations.
Debt-ridden Country Garden gets creditor approval to delay 6 bond repayments
Debt-ridden Country Garden gets creditor approval to delay 6 bond repayments
“The group has experienced a rapid decline in contracted sales and increased uncertainty in asset disposals and has continuously faced limitations in various financing activities,” Beijing-based Sino-Ocean said in the filing. “The optimal path forward is a holistic restructuring” to stabilise its operations, it added.
It hired US investment bank Houlihan Lokey to reorganise its finances and has retained Sidley Austin for legal advice.
Sino-Ocean’s shares closed at HK$0.66 apiece on Thursday, having lost 42 per cent of their market value this year. The developer’s key shareholders are state-controlled insurers China Life Group and Dajia Insurance Group with more than 29 per cent stake each, according to its filing.
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Losses widened to 18.6 billion yuan in the first half of 2023 from 1.1 billion yuan in the same period a year earlier, according to its latest financial report.
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Sino-Ocean has eight dollar bonds outstanding, paying between 2.7 per cent and 6 per cent annual coupons with maturity up to 2030, according to the filing. They have a combined face amount of US$3.918 billion, according to Bloomberg data.
“The group’s liquidity is still expected to be confronted with continuous challenges in the short-to-medium term”, underscoring the need to negotiate with creditors to manage its liabilities. A holistic debt workout will ensure “fair and equitable treatment” for all its creditors, it added.
In the meantime, Sino-Ocean said it would be focusing on the delivery of current projects and accelerate the sale of properties under development and completed properties and stabilise its business operations to protect the interests of homebuyers, the group’s partners and all stakeholders.
Despite its financial struggle, the group managed to deliver 16,000 homes in Guangzhou, Shenzhen, Wuhan, Tianjin and Jinan during the first half of this year.
Additional reporting by Jiaxing Li
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The news is published by EMEA Tribune & SCMP
