Sino-Ocean Hit With Wind-Up Petition as Debt Repayment Plan Goes Off Track

Sino-Ocean Group has received a winding-up petition filed by Bank of New York Mellon, dealing a fresh blow to the cash-strapped Chinese developer as it struggles to stick to a debt repayment plan hammered out with some of its bondholders.

The legal action in Hong Kong’s High Court by the London branch of the Manhattan-based bank relates to Sino-Ocean’s failure to make payments on offshore bonds due in 2026 with a principal amount of $400 million, the Beijing-based builder said Friday in a filing with the Hong Kong stock exchange.

Sino-Ocean plans to “oppose the petition vigorously” and continue to work closely with financial and legal advisors as it holds talks with creditors on what it calls a “holistic” debt management arrangement.

“The board is of the view that the petition does not represent the interests of other stakeholders and may impair the value of the company,” said the group led by chairman and CEO Li Ming. “Therefore, the company will seek legal measures to resolutely oppose the petition, and take all necessary actions to protect its legal rights.”

State-Backed Builder Stretched

The announcement came one day after Sino-Ocean said it did not expect to make a RMB 200 million ($27.5 million) payment to bondholders due on 30 June. The instalment payment is part of a deal reached between the developer and its onshore creditors on 28 March, with the group saying it still has a 30-day grace period within which to avoid a formal default.

State-backed Sino-Ocean, in which China Life holds a 29.59 percent stake, has been selling assets to meet funding requirements. The developer reported an attributable net loss of RMB 21.1 billion in 2023 and total borrowings of RMB 96.1 billion as of December, of which RMB 69.8 billion was due within one year, while cash and cash equivalents amounted to just RMB 2 billion.

The group agreed to sell its entire 64.79 percent stake in a commercial project in Beijing’s Chaoyang district to joint venture partner Swire Properties and a vehicle of China Life for RMB 4 billion ($552 million) in a deal disclosed earlier this month.

The transaction, which remains subject to shareholder approval, also involves Hong Kong-based Swire and the China Life vehicle respectively assuming RMB 28.7 million and RMB 96.1 million of outstanding principal and interest related to Sino-Ocean’s loans to the project, known as Indigo Phase II.

Sino-Ocean’s HKEX-listed shares leapt 6.7 percent to HK$0.48 on 11 June after news of the deal broke, but they quickly eased and were trading at HK$0.34 ($0.04) on Friday.

Motivated Seller

The Indigo Phase II disposal marks Sino-Ocean’s second sale of a mainland project to Swire, with the Hong Kong developer having bought out the group’s half-stake in the Sino-Ocean Taikoo Li Chengdu shopping centre for RMB 5.5 billion in December 2022.

Other divestitures by Sino-Ocean include the Ocean We-Life Plaza Beijing mall, which the developer agreed to sell to Shenzhen-based retailer Easyhome for RMB 359.2 million in May 2023, as well as the group’s 10 percent stake in the China Life Financial Centre office tower in Beijing to a pair of China Life subsidiaries for RMB 230 million in 2022.

In September 2023, Sino-Ocean suspended payment on all its offshore borrowings, citing the need to facilitate a holistic debt restructuring.