Shimao Clinches Deal to Restructure Sheraton Hong Kong Hotel Loans

Shimao Group on Monday announced a “definitive agreement” with lenders to restructure the existing project loan facilities of the troubled developer’s Sheraton & Four Points by Sheraton Tung Chung Hotel in Hong Kong.

Clinched last month, the loan restructuring deal comes after JLL revealed in March that it had been appointed exclusive sales agent for the dual-branded hotel project on Lantau Island, roughly 10 minutes from Hong Kong International Airport, with a reported asking price of $828 million for the 1,200-key complex.

The project may form part of an asset package as supplemental credit enhancement for Shimao’s broader debt restructuring plan, the builder led by tycoon Hui Wing Mau said in a filing with the Hong Kong stock exchange. It offered no particulars about what such a package would entail.

Shimao is attempting to reach an agreement with creditors to restructure $11.8 billion in offshore debt, as its Hong Kong-listed stock remains suspended since the first of April last year after the company failed to file its 2021 financial reports.

Work in Progress

Shimao said Monday that the group’s audit work for 2021, the review of the 2022 interim results and the audit work for 2022 were still in progress.

“The company will publish the 2021 audited annual results, the 2022 interim results and the 2022 audited annual results, and despatch the respective annual reports and interim report as soon as practicable,” vice chairman Jason Hui, son of Hui Wing Mau, said in the stock filing.

He noted that the group in the past several months had actively pushed forward the offshore debt restructuring plan and that the parties were “working to narrow differences on various economic terms among various groups of creditors contemplated under the restructuring proposal”.

Reuters reported last August that Shimao had proposed a two-class restructuring plan to creditors to repay its offshore debt load over a period of three to eight years. The creditors were said to prefer a plan that would treat all classes of offshore creditors equally and prevent an outflow of capital from offshore entities.

Under the reported terms of the plan, Shimao would retain the right to dispose of two assets in Hong Kong — the Tung Chung hotel project and the Tai Wo Ping luxury housing development in Kowloon — and use the proceeds for pro rata repayment, as well as prepayment or repurchase in the secondary market of new instruments issued in relation to the restructured debt.

Last September, Shimao reached a deal with UOB that would see the Singaporean lender buy out a HK$10 billion ($1.27 billion) loan linked to the Tai Wo Ping project, paving the way for the bank to take ownership of a full or partial stake in the under-construction complex at 9 Yin Ping Road.

Delisting Threat

To remain solvent, cash-strapped Shimao has scrambled to raise cash by disposing of assets.

In April, the developer closed on the sale of Sancroft at St Paul’s, an office building in the City of London, to a joint venture of local investment manager Greycoat and Japan’s Mitsui Fudosan for £315 million ($395 million).

Last September, Shimao agreed to sell stakes in a pair of Beijing projects to state-backed China Resources Land in a deal that helped raise $480 million.

Along with several other Chinese developers whose HKEX-traded stocks were suspended in April 2022, Shimao is nearing an 18-month deadline before it faces delisting from the bourse.

One of those developers, China Aoyuan Group, just reached an agreement with one-third of the holders of its $5.9 billion in foreign currency debt on a restructuring plan that would let the company obtain capital to sustain its daily operations, the South China Morning Post reported this week.