Sunac China wins Hong Kong court approval to implement US$10.2 billion debt workout with creditors in boost to stock prices

Court sanction allows Sunac China to move ahead of its troubled mainland peers in fixing its debt defaults and financial distress

Sunac will repay US$10.2 billion to more than 2,000 offshore creditors with a combination of new bonds and an equity stake in Sunac Services

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Published: 5:15pm, 5 Oct 2023Updated: 5:18pm, 5 Oct 2023

Sunac China Holdings is taking a step closer to resolving its debt crisis after a court sanctioned its US$10.2 billion debt restructuring, giving offshore creditors relief after recent hiccups at China Evergrande Group. Shares of the property developer surged as much as 12 per cent.

The High Court in Hong Kong approved the developer’s workout plan at a hearing on Thursday, paving the way for creditors to get their money back after Sunac defaulted on several US dollar denominated bonds and other liabilities. Creditors owning 98.3 per cent of the claims acceded to the restructuring terms during a vote last month.

Sunac is believed to be the first among defaulted Chinese developers to win court consent, moving ahead of peers in overcoming two years of debt crunch. China’s property sector has produced more than US$100 billion of bond defaults, according to a JPMorgan estimate, since Beijing’s “three red lines” policy plunged home builders into unprecedented financial distress.

Sunac chairman and founder Sun Hongbin, seen during a media briefing in Hong Kong in March 2019. Photo: Edmond So

Sunac jumped as much as 12 per cent to HK$2.31 in Hong Kong before closing at HK$2.19. The stock has more than doubled over the past five weeks in anticipation of a workout deal. Sunac Services rose 4.7 per cent to HK$2.47.

The progress offers “only a slight” boost to the housing industry, said Raymond Cheng, managing director of CGS-CIMB Securities. “Eventually, we need to see sales recovery, which is very critical for developers.”

Sunac, the country’s third-biggest developer in 2021, agreed to repay more than 2,000 offshore creditors by issuing US$5.7 billion of new long-term bonds with maturities of up to nine years, US$1 billion of convertible bonds and US$2.75 billion of bonds that must be converted into its shares in future, according to a stock exchange filing last month.