Sunac China chairman Sun Hongbin seems a bit overwhelmed by this latest challenge (Getty Images)
Sunac China Holdings said it will take all measures to defend itself against a winding-up petition filed in Hong Kong as the debt-wracked property developer works to restructure its offshore liabilities after missing bond payments earlier this year.
A winding-up petition has been filed by an individual named Chen Huaijun against Sunac at the Hong Kong High Court, the judiciary’s website showed. A hearing will be held on November 16, according to records for case number HCCW 319/2022 on the website. A report in mainland business news site Jiemian identified Chen as a holder of Sunac offshore bonds with a listing in a Baidu database indicating that the petitioner formerly served as general manager of Anhui-based property company Kingdom Group.
“The petition is a radical behavior of an individual creditor that would not have a material impact on the company’s operation and debt restructuring,” Sunac said in a statement sent to Mingtiandi.
The developer, which has around $7.7 billion in offshore notes to repay, saw PriceWaterhouseCoopers resign as its auditor in June as it has struggled to meet its obligations and faces rising pressure from creditors.
Restructuring Struggle
A winding-up petition can be filed against a company in a Hong Kong court when a creditor is owed at least $10,000, according to the Official Receiver’s Office. If the court gives a winding-up order and appoints a provisional liquidator, the latter may take over control of the company, dispose of its realisable assets and distribute any remaining funds to creditors whose claims have been admitted.
China’s defaulting developers have been keeping Hong Kong’s High Court busy this year (Getty Images)
While Sunac said it has not yet received any documents regarding the winding-up petition, the company has vowed to take all measures to defend itself.
“The percentage of debt entitled to the individual creditor is very small. It is also debatable and up to decisions from a court hearing whether the winding-up petition, filed directly by an individual rather than through a trust, has legal effect,” said a Sunac representative.
Sunac has been actively communicating with advisors to a committee representing its creditors over a preliminary debt restructuring plan, and the company plans to announce the scheme within this year, added the representative.
Ranked as China’s fifth largest developer in 2021 by contracted sales attributed to shareholders, Sunac saw its contracted sales plunge by 67.6 percent year-over-year to RMB 134.6 billion in the first eight months of this year. For the period from January through August, Sunac slid to ninth place among mainland builders, according to research by data provider China Real Estate Information Corporation (CRIC).
The developer controlled by tycoon Sun Hongbin failed to pay $29.5 million in interest on $750 million in senior notes within a grace period that ended on May 11, sending it into default. Also during May, Sunac warned creditors that it is likely to miss deadlines for coupon payments on three other offshore bond series.
Like other troubled Chinese developers, Sunac has prioritized paying onshore bonds. Less than a week after defaulting on offshore notes, Sunac China notified holders of its RMB 400 million domestic bond that it would make an initial payment on the notes’ principal in time, according to a Bloomberg report in May.
With property sales weak and refinancing difficult to find, Sunac is on the verge of defaulting on its onshore debt too. In June, the developer met with investors to seek a second extension on RMB 4 billion ($600 million) in domestic notes only three months after creditors had agreed to reschedule payment on the bonds into a set of six quarterly instalments over the next 18 months.
Courts of Last Resort
As developers continue to stretch out their repayment horizons, some smaller creditors are increasingly turning to courts to force builders to honour their financial obligations, highlighting the turmoil in China’s property sector as developers struggle to craft debt-resolution plans.
In June, a US creditor filed a winding-up petition against China Oceanwide Group with the Supreme Court of Bermuda on the grounds that the developer had failed to pay an outstanding obligation of $175 million on a New York City project.
This week, Hong Kong’s High Court approved an application by China Evergrande Group and its major offshore credit group to adjourn a winding-up petition filed by an investor against it to November 7 in order to allow the company more time to formulate an offshore debt restructuring plan.
Jiayuan International Group was the latest developer to be hit with a winding-up petition before Sunac, with the Jiangsu-based builder having informed the Hong Kong stock exchange of two such cases brought against it in June. Jiayuan also has a November hearing scheduled for its case.
Other developers facing winding-up petitions include Yango Justice International, Fantasia Holdings Group and Sinic Holdings Group, according to public information compiled by Bloomberg.
Trading of Sunac’s shares in Hong Kong has been suspended since April 1 as the developer has yet to release its 2021 annual results or 2022 interim results.
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