Distressed Chinese developer CIFI offers up new proposal hoping to slash US$7 billion offshore debt by half

CIFI seeks to address its aggregate offshore indebtedness by “deleveraging the company’s consolidated balance sheet” to reduce its offshore debt to between US$3.3 billion and US$4 billion. The company also aims to design a sustainable amortisation schedule to provide a healthy capital structure, the filing said.

Therefore, the revamped plan, following an earlier proposal in March, also includes a debt-equity swap option for creditors to equitise the debts via an instrument with a seven-year final maturity, according to the developer.

Options with equitisation or haircut elements will have shorter maturity, the company said, adding that most of the maturity extensions will range from two to nine years, with a new coupon rate of 2 per cent to 4 per cent.

The Shanghai-based home builder also said it is considering “gradually disposing of part of its investment properties and offshore assets, subject to market conditions and asset operation circumstances”, which is expected to inject 12 billion yuan to 14 billion yuan (US$1.68 billion to US$1.96 billion) of liquidity.

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Anger mounts as China’s property debt crisis leaves flats unfinished

Anger mounts as China’s property debt crisis leaves flats unfinished

The company expects to generate total cumulative cash flow of between 30 billion yuan and 35 billion yuan for offshore debt service, it said.

CIFI also aims to deliver 80,000 homes in 2024 with its “best endeavour”. The company delivered a record 118,000 units last year, but added that it may face more difficulties this year, leading to anticipated costs exceeding 30 billion yuan.

The Chinese property sector has been suffering through a liquidity crisis including dozens of developer defaults over the past three years after Beijing tightened rules around borrowing. Authorities issued a set of rescue plans in late 2022, including credit support and bond issuance. However, debt repayment remains one of the biggest challenges for Chinese developers in 2024.

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A report released by Fitch Ratings in late November said that mainland property developers will continue to face significant bond repayments in 2024, as the principal amount of onshore and offshore bonds due or puttable will hit a total of 737.3 billion yuan in 2024, up 11.3 per cent from the 662.5 billion yuan in 2023.

Meanwhile, the international ratings agency expects that nationwide contracted home sales will drop by up to 5 per cent in 2024.

CIFI shares jumped 13.7 per cent to HK$0.29 on Wednesday in Hong Kong, outperforming a 2 per cent loss for the Hang Seng Mainland Properties Index, a gauge of Hong Kong-listed mainland developers. CIFI shares are down 77.5 per cent compared with a year ago.

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The loss of 28 million yuan from the disposal “is not expected to have immediate material impact on the financial position of the group”, the company said.

Just days earlier, another CIFI subsidiary, Liaocheng Xuyin, sold a 51 per cent stake in its Dezhou residential project, located in Shandong province, to Shandong Zhongzheng for 221 million yuan. The company posted a loss of 215 million yuan on that deal.