Xinyuan, Petitioning Creditors Agree to Put Litigation on Pause and Negotiate Over Restructuring Terms; Company Consents to Chapter 11 Case If Talks Fail by July 31 Deadline

At a trial today on Xinyuan Real Estate’s motion to dismiss its involuntary chapter 11 proceeding, Xinyuan and the three creditors that commenced the case announced that they would cease litigation so that they could pursue settlement talks, and that such talks would run through July.

The parties’ attorneys said the hope is that the negotiations will yield a plan in the company’s Cayman Islands restructuring proceeding that is acceptable to the petitioning creditors. There is a July 31 deadline to reach a deal, counsel stated. If no deal is reached by that time, the chapter 11 case would continue.

Xinyuan’s counsel added that the company has consented to entry of an order for relief in the chapter 11 case (which would effectively moot their motion to dismiss) in the event that no deal is reached by July 31. Further, Xinyuan will fund up to $250,000 in reasonable go-forward attorney fees, so that negotiations will be “at no cost to petitioners,” according to the petitioning creditors’ counsel.

Cithara Bosideng, Star Freight and Mars Partner Ltd. are the three petitioning creditors that commenced the chapter 11 case in April 2025. Xinyuan unsuccessfully argued for dismissal of its case earlier this year on a forum non-conveniens theory, citing the Cayman Islands restructuring proceeding it had commenced. Judge Philip Bentley, who presides over the chapter 11 case, rejected that theory in a January hearing, noting in a subsequent March 3 written opinion that the Cayman Islands proceeding was stalled and lacking in creditor support.

In its most recent motion to dismiss, Xinyuan argued that the case should be dismissed for three separate reasons. First, because Cithara Bosideng’s claim against Xinyuan is in bona fide dispute, second, because that same creditor lacks standing, and third, because that creditor’s principal – Zhang Jun – and Mars Partner’s principal – Song Yan – colluded and filed the case in bad faith.

Xinyuan asserts that Zhang and Song knew each other prior to commencing the case and that Song lied during his deposition about whether he held an interest as a one-third owner alongside Zhang in Vision Capital. Vision Capital is the company that is alleged to have brokered the transaction where Mars Partner and Star Freight purchased their Xinyuan notes, giving rise to claims necessary to commence the involuntary chapter 11 case.

Judge Bentley heard from only one witness today – Cithara Bosideng’s Zhang – who was called as a hostile witness by Xinyuan. Zhang was presented with one of Vision Capital’s corporate filings. The document seemed to indicate that Song owned a one-third share in Vision alongside Zhang, and that Vision Capital’s office was right next to Cinthara Bosindeng’s. Zhang was also asked about an investment that Mars Partner made in Cinthara Bosindeng.

Zhang was evasive during questioning. When asked whether it was possible he had contact with Song before a meeting with lawyers to discuss enforcement options for their respective defaulted Xinyuan notes, Zhang said, “I don’t believe this is a reasonable question,” as it is “possible you could have a casual contact, like exchanging two sentences in a group setting or something like that … one or two simple words and this could possibly happen.”

The court took a recess after Zhang provided his testimony. Song was due to testify, but before he did, the parties announced their agreement.