Amid the worsening financial crisis, leading Chinese developer, Shimao Group has released a two-class restructuring plan. The plan includes a commitment to repay offshore creditors $11.8 billion within the next three to 8 years. The Shanghai-based developer, which reportedly failed to fulfill a public offshore bond obligation in July, is among the first major developers in China to come up with restructuring terms with creditors.
The last few months have been particularly challenging for developers in China as the property sector continues to dwindle. The current situation in the property sector has forced many developers to default on their offshore loan obligations.
While three of the country’s leading bond issuers, including Sunac China, China Evergrande Group, and Kaisa Group, defaulted on their dollar bonds a couple of months ago, Shimao joined the fold and is now working out a solution that will benefit the parties involved.
In its restructuring agreement, Shimao stated that it would exclude $2.3 billion in offshore debt, including loans from offshore creditors and onshore financial institutions. Unfortunately, the company is yet to oblige the request for comments.
Showdown with offshore creditors
While Shimao Group is working on a solution to meet its offshore loan agreements, its restructuring plans have been turned down by unhappy creditors who want the developer to treat all classes of offshore creditors equally. Creditors believe that the proposal is unfair to all parties involved. Meanwhile, they are making new demands pressurizing the developer to increase the ratio of the amortized repayment. They are also asking for a sweetener to boost the credit profile of the debt.
While the restructuring terms by Shimao first came to light on Friday after the company reached out to some investors, more details have emerged today about the restructuring terms proposed by the developer.
As part of its restructuring terms for its $11.8 billion debt, Shimao plans to repay class A debt, which accounts for $4.65 billion worth of syndicated loans. It plans to repay this loan between 36 to 72 months. The remainder of the $7.13 billion Class B debt will be repaid in 6 tranches, with the firm proposing to pay everything between 39 to 93 months.