China Aoyuan wins Hong Kong court’s approval to proceed with restructuring more than US$4 billion of offshore debt, loans

China Aoyuan wins Hong Kong court’s approval to proceed with restructuring more than US$4 billion of offshore debt, loans

China Aoyuan wins Hong Kong court’s approval to proceed with restructuring more than US$4 billion of offshore debt, loans

Property developer China Aoyuan Group said it has secured approval from a Hong Kong court to proceed with a restructuring involving more than US$4 billion of offshore debts and many loan facilities with lenders after almost a year of negotiations with creditors. The stock surged 12 per cent.

The consent from the local court came on January 11, the developer said in a stock exchange filing on Friday. This came in addition to similar sanctions granted by courts in Cayman Islands and British Virgin Islands in December, given that some of its foreign-currency debts were sold by its units incorporated in those jurisdictions.

The sanction by the courts “is a major milestone towards the implementation of the holistic restructuring of the group’s material indebtedness,” chairman Guo Zi Wen said in the filing. The debt plan will protect the interests of all stakeholders and allow the firm to deliver its projects on schedule, he added.

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Aoyuan became the latest debt-laden Chinese home builder to win a reprieve from creditors in China’s property market shakeout, joining struggling peers like Sunac China and Kaisa Group in staving off liquidation. Chinese developers defaulted on more than US$100 billion of bonds since China’s “three red lines” policy in mid-2020 crippled weak borrowers while the ensuing Covid-19 pandemic plunged sales.

Guangzhou-based China Aoyuan officially defaulted on US$1.1 billion of notes in January 2022, triggering cross defaults in its borrowings. The group had 242 billion yuan (US$33.8 billion) of total liabilities on June 30, including the equivalent of about 73 billion yuan of bank borrowings and 34.4 billion yuan of bonds, according to its accounts.

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The developer has proposed to issue US$500 million of seven-year bonds, US$1.6 billion of perpetual securities, US$143 million of zero-coupon five-year bonds, and new shares worth about HK$943 million (US$120 million) to repay its offshore creditors, according to its debt exchange proposal.

The developer has had to sell assets to replenish its coffers. Last February, it sold its 29.9 per cent stake in Aoyuan Healthy Life Group, a Hong Kong-listed property services company, for HK$256 million.

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Its shares rose 12 per cent to HK$0.213 at 3pm local time in Hong Kong. The stock has slumped 35 per cent over the past 12 months. Trading resumed last September after the firm belatedly published its 2022 accounts in July.

China Aoyuan said losses narrowed 17.6 per cent to 2.89 billion yuan in the six months to June 30, while revenue rose by about a quarter to almost 11 billion yuan. It had 259 ongoing projects with a gross floor area of about 28.2 million square metres.

“The real estate market is expected to be stable and the industry will eventually enter a new stage of stable and healthy development as the central government has set the adjustment and optimisation to the real estate policies,” the company said in the interim report to shareholders in September.

“In the future, the group will continue to concentrate on the Guangdong-Hong Kong-Macau Greater Bay Area with focus on the nature of real estate, open up the source and regulate the flow, and improve the quality of products and services,” it said.

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