China Developer Shimao Looks To Repay $11.8 Billion Debt Over 3-8 Years -sources
Cash-strapped Chinese developer Shimao Group has proposed a two-class restructuring plan to offshore creditors to repay $11.8 billion over a period of three to eight years, according to two sources with direct knowledge of the matter and a document seen by Reuters.
Shanghai-based Shimao, which first missed a public offshore bond obligation last month, is the first major Chinese developer to kick off negotiations on restructuring terms with creditors.
China's property sector has been hit by a series of defaults on offshore debt obligations, with three of the top five bond issuers - China Evergrande Group, Kaisa Group and Sunac China - having already defaulted on their dollar bonds. Shimao is the sixth largest issuer.
Shimao's restructuring plan will, however, exclude $2.3 billion offshore debt including offshore project loans, and loans backed by onshore financial institutions or governed by mainland Chinese law.
Shimao did not respond to request for comment.
Unhappy about the proposal, offshore creditors plan to request Shimao to treat all classes of offshore creditors equally, and prevent capital from flowing out from the offshore entities, according to one of the sources.
Creditors also plan to ask the company for an increase in the ratio of the amortized repayment, and a sweetener to enhance the credit profile of the debt, the person said.
Debtwire first reported on Tuesday about Shimao's restructuring terms that were communicated to some investors last Friday.
Under the proposed restructuring terms of the $11.8 billion debt, Shimao would repay Class A debt, which are $4.65 billion worth of syndicated loans and guaranteed bilateral loans under an amortization schedule between 36 to 72 months.
A total of $7.13 billion Class B debt, which are all the public and private bonds and unguaranteed bilateral loans, would also be repaid in six tranches of new notes worth 9% to 23% of the claims with maturities ranging between 39 to 93 months.
The developer said it will retain the right to dispose two assets in Hong Kong, namely the Tai Wo Ping project and Tung Chung Hotels, and use the proceeds for pro rata repayment, and prepayment or repurchase in the secondary market of the new instruments issued in relation to the debt being restructured.
Shimao also told some of its offshore creditors that it planned to pay them interest after the company's cash flow recovers, one of the sources said.
Shimao has hired Admiralty Harbour Capital and Sidley Austin as advisers.
Last week, financial news provider REDD reported smaller developer Fantasia Holdings proposed a haircut of as much as 60% in a preliminary offshore debt restructuring plan, and swap the remaining debt into company shares.
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