Chinese property agent E-House files for US Chapter 15 protection to implement debt workout after bond defaults
- E-House is undergoing a debt restructuring in the Cayman Islands, where it is incorporated
- The company had defaulted on a US$300 million note due in April 2022, triggering a cross-default on a US$300 million bond due in June 2023
The Shanghai-based firm, through its foreign representative Alexander Lawson, filed for protection under Chapter 15 of the US bankruptcy code in the Southern District of New York Court on Monday, according to a Hong Kong stock exchange filing.
A Chapter 15 filing prevents creditors from seizing the company’s assets while it undergoes a debt restructuring in the Cayman Islands, where E-House is incorporated. A creditors’ meeting to vote on the company’s repayment plan is scheduled for October 12.
E-House defaulted on a US$300 million 7.625 per cent notes due in April 2022, and a US$300 million 7.6 per cent notes due in June 2023, according to a filing in April. It has proposed to repay bondholders US$60 in cash and US$940 in new 2025 bonds for every US$1,000 owed, plus accrued interest.
“The company continues to explore ways to secure the requisite funds to repay the 2022 notes on the maturity date,” chairman Zhou Xin said in the April filing.
Consenting creditors face an October 5 deadline to deliver their decision to earn the 1 per cent incentive fee of 1 per cent of bond value. The restructuring scheme will be put to vote on October 12 and the deal is targeted to be binding on October 31, according to its restructuring timetable.
E-house swung to a loss of 9.4 billion yuan (US$1.3 billion) in 2021 from a profit of 349 million yuan in 2020.
China’s 18.2 trillion yuan housing industry’s woes have spread to the rest of the economy, with banks, bad-debt managers and upstream and downstream suppliers of property developers among those affected.
Home builders have been squeezed by falling sales and a debt crisis compounded by Beijing’s “three red lines” policy. This has constricted borrowings by developers and forced China Evergrande Group and peers such as Sunac China Holdings to default on their loans.
Policymakers have sought to support the economy with a variety of measures ahead of the 20th party congress this month.
A day later, the central bank announced that it would lower the interest rate for housing provident fund loans by 0.15 percentage points for first-time homebuyers from October 1, while the Finance Ministry said residents who buy new homes within one year of selling old homes will be refunded personal income tax on the sale.
