Sunac Shares Jump 20% After Creditors Back Debt Proposal (1)

Published 21 April 2023, 04:30:09.360 GMT

(Bloomberg) -- Sunac China Holdings Ltd. opened as much as 20% higher in Hong Kong after clearing a major hurdle in the restructuring of $9 billion worth of debt.

The company’s shares reached HK$1.88 as of noon break on Friday, up about 6% while narrowing its 59% plunge since resuming trading in mid-April. Its offshore bonds were little changed Friday morning at around 21 cents on the dollar.

Investors holding more than 75% of its offshore debt have accepted a restructuring proposal, Sunac said late Thursday. A
so-called scheme of arrangement, which Sunac expects to implement its debt restructuring through, requires the agreement by over at least 75% in value and 50% in number of creditors, according to a report by law firm Allen & Overy last year. If approved by the court, the scheme will become binding on all creditors, including those who voted against and those who did not vote at all.

“This is positive for equity, as it means Sunac is unlikely to be liquidated,” said Leonard Law, senior credit analyst at Lucror Analytics. “That said, it will be a very slow and long process for bond prices to recover.”

For China’s broader junk market, the outlook is less certain, said CreditSights Inc. senior analyst Zerlina Zeng. Worries about property firms Dalian Wanda Group Co. and Sino-Ocean Group Holding Ltd. have spurred fresh selloff in dollar bonds in recent days, as offshore investors appear more worried than onshore ones, according to Zeng.

Sunac received enough investor support despite advisers urging creditors to rethink. Earlier this week, a group of offshore creditors outside the ad-hoc committee called on other creditors to refrain from signing the restructuring support agreement in an attempt to “get a better deal.”

Chinese developers including Sunac fell into distress during an unprecedented property slump, prompting regulators to
formulate a sweeping rescue plan for the industry. The firm warned investors that it expects a second consecutive year of net losses of as much as 28 billion yuan ($4.1 billion), partly due to delays in project delivery.

-- With assistance from John Cheng and Dorothy Ma.