Octus on Credit: Sunac China hints at aggressive restructuring

Anna Zhang, Senior China Researcher

Developer Sunac China is again having offshore debt problems. 

As Octus predicted back in September, Sunac is among developers expected to enter more aggressive second restructurings, as China’s property sales continue to disappoint, and there is little sign that homebuyers’ will soon regain faith in the market.

China Cinda (HK) Asset Management Co. Ltd. has filed a winding-up petition against Sunac in Hong Kong over a $30 million loan. 

In response, Sunac said that market conditions are significantly below expectations underpinning its November 2023 offshore restructuring, and it doesn’t rule out a second, “more comprehensive holistic” offshore debt solution “based on the actual situation.”

Under the 2023 restructuring, Sunac is due to start making cash interest payments in 2025. But its sales performance has significantly declined since then. Full year 2024 contracted sales value plunged around 44.4% year on year to CNY 47.14 billion ($6.6 billion), from CNY 84.77 billion in 2023.

When the developer negotiated its first restructuring in 2022 and 2023, it didn’t include any nominal principal haircut, but by 2024, other Chinese developers like CIFI and Shimao were out with restructuring deals involving deep principal reductions on top of an equity swap component. 

Sunac’s reference to a solution to its “actual situation” signals a severe principal reduction on offshore debt, and an aggressive deleveraging. 

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