Sunac China sells Shenzhen snow park project to state-owned partner to tackle US$11 billion debt load

China’s fourth-largest developer is selling its 51 per cent stake in a Shenzhen indoor snow park project to lighten its debt load, with a buy-back option in 2025

Sunac last month outlined a plan to convert the largest part of its US$11 billion offshore debt into equity, new long-term bonds to appease creditors

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Sunac’s new high-end development community in central China. Photo: Shutterstock Images

Published: 1:14pm, 4 Jan 2023

Sunac China is planning to unload one of its most-prized projects in Shenzhen to a state-owned joint venture partner at a loss, speeding up an asset-sale programme after defaulting on some of its US$11 billion of offshore debt last year.

The nation’s fourth-largest developer agreed to sell its 51 per cent stake in Shenzhen Ronghua Land Investment to its joint-venture partner Zhuhai Huafa Industrial for 3.58 billion yuan (US$520 million), according to an exchange filing late on Tuesday. The deal includes an option for Sunac to buy back the stake before November 2025.

Shenzhen Ronghua paid 12.71 billion yuan for a plot of land in the Bao’an district in Shenzhen, with the aim of building the world’s largest indoor snow park covering an area of 1.31 million square metres. The complex would include residential, office and hotel properties.

Chairman Sun Hongbin, seen in March 2019 during a Hong Kong briefing on its 2018 results. Photo: Edmond So

It was twice selected by the local government in 2021 and 2022 as a showcase development project for the city. However, construction has been halted since November 2021 due to various factors, while Sunac struggled to fend off a liquidity crunch triggered by China’s “three red lines” clampdown.

Sunac will extricate itself from the burden of funding the snow park project, allowing it to repay about 2.1 billion yuan of loan and interest incurred to acquire the project, the developer said in its filing. The sale will also release related guarantees, thus trimming its overall debt load.

The deal reflects yet another instance where local government authorities have stepped in to save debt-laden developers from collapse, as Beijing softens its clampdown in the sector. Others including CIFI Holdings and China Evegrande Group have also received a helping hand from state-owned partners to buy time and repair their balance sheets.