Embattled Chinese developer Shimao seeks offshore investors’ approval to restructure US$11.7 billion debt

The Shanghai-based firm is seeking approval from offshore creditors for a restructuring plan, according to a filing made to the Hong Kong stock exchange late on Monday, as part of its latest efforts to avoid liquidation.

Shimao’s creditors have been presented with four options, including repayment through short-term notes, long-term notes, zero-coupon mandatory convertible bonds and a combination of different securities, according to the filing.

But the aggregate principal amount offered through short-term notes or loans due in six years to the offshore creditors will not exceed US$3 billion under the scheme, while the amount allocated to long-term notes or loans due in seven to nine years will not exceed US$4 billion, the company said.

“The company believes that the proposal represents a reasonable and realistic solution for the compromise of the offshore debt, having taken into account the expected conditions in the property market in China and the company’s cash flow position,” Shimao said.

The developer has been trying to resolve its debt issues since it announced an initial restructuring plan last December. It missed the interest and principal repayments for a dollar bond in July 2022 and has been in default for its entire US$11.7 billion offshore debt since then.

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The latest restructuring proposal follows media reports that Deutsche Bank was preparing to file for liquidation, casting doubt over Shimao’s ability to reach an agreement with creditors for the initial plan.

The developer said that its latest proposal will help it improve its capital structure and enable it to better manage its operations and deliver long-term value for stakeholders.

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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

Hui Wing Mau, Shimao’s controlling shareholder who has lent the developer HK$7.8 billion (US$997.3 million), will be repaid with US$600 million of 2 per cent 9.5 years bonds plus mandatory convertible bonds.

Any failure to reach an agreement with its creditors could add to the risks for Shimao, potentially pushing impatient creditors to file for liquidation.

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“The property market … will take longer to turn around,” Moody’s Analytics said in a report this month. “Households will keep clear of the market through 2024 as developers’ woes continue. In response, real estate investment, prices and sales will fall – albeit at a slowing pace.

“Come 2025, real estate will return to a modest rate of growth. But do not expect it to be the growth engine of years gone by; memories of the past few years will stick with households and developers.”