Costs of US$715 million in defaulted debt associated with a Beijing project are reduced by Sunac China.
Sunac China, one of China’s biggest home builders, managed to lower its borrowing costs and averted a penalty after restructuring a 5.2 billion yuan (US$715.6 million) outstanding debt linked to a prime residential and commercial project in Beijing.
The developer signed an agreement with China Credit Trust and China CITIC Financial Assets to repay the debt owed by its unit Beijing Oceanwide Dongfeng Real Estate over four years to January 2029, according to a Hong Kong stock exchange filing on Monday. The company had trimmed the initial debt by 1.64 billion yuan before it defaulted in September 2023, it said.
Sunac said the creditors have agreed to waive the default cost, reduce the overdue accrued interest to 650 million yuan, and lower the annual interest on the outstanding debt to 6.5 per cent from 9.6 per cent. This effectively cut its borrowing costs on the original debt to 4.12 per cent from the borrowing date, it added.
China Credit Trust fell into a crisis after its loans to Chinese property developers turned sour as the nation’s housing market slumped and builders reneged on repayment. The trust company has since assigned some of its bad debt to China CITIC Financial Asset to overcome its cash crunch and repay its investors.
This has provided “a complete exit solution” for the trust investors and effectively reduced the debt pressure of the project, providing the project with more solid financial support, Sunac said.
The settlement deal came less than a week after Sunac completed a deal with 10 creditors to cut its 15.4 billion yuan debt by more than half, making it the first among local home builders to complete an onshore debt workout. Chinese developers have 700 billion yuan of debt maturities this year, according to the China Index Academy.
Beijing Oceanwide is the developer of One Sunac Opus, a luxury residential project in the capital’s core Chaoyang district. The site is surrounded by four main business circles, namely CBD, Yansha, Lido and Chaoqing, according to the filing. The 75,200-square metre (809,000 sq ft) site also has a commercial development portion.
Sunac’s challenges are far from over. The developer is still facing a winding-up petition by China Cinda Asset Management in Hong Kong over a US$30 million loan. A hearing is scheduled for March 19.
The developer has not ruled out further debt reorganisation as home sales fell “significantly below” expectations, compared with when it first restructured its US$9 billion offshore debt in November 2023.
China’s property sector has been mired in a prolonged slump since late 2020, crippled by Beijing’s “three red lines” policy in August 2020 and the Covid-19 pandemic. New home sales fell 17.6 per cent in 2024, while sales by the country’s top 100 developers contracted 28 per cent, according to China Real Estate Information Corporation.
