Sunac liquidation suit hammers shares, renews property debt crisis concerns

By Clare Jim

HONG KONG (Reuters) -Sunac China shares and bonds plunged on Friday after a liquidation petition was filed against the developer, reigniting investor concerns about the debt crisis in the property sector despite Beijing’s revival measures.

The petition, filed by a unit of state-owned asset manager China Cinda Asset Management, also deepened worries over Sunac's business recovery and repayment ability despite an offshore debt restructuring it completed in 2023.

A hearing is scheduled for March 19, the Hong Kong judiciary's website showed late on Thursday.

Many mainland developers, including China Evergrande (HK:3333 ) and Country Garden (HK:2007 ), have faced or are currently facing liquidation cases in Hong Kong since the property sector was hit by a liquidity crunch in 2021.

But petitions have rarely been filed by state-owned companies and China Cinda's was made despite Beijing's pledges to stabilise the struggling property sector and the stock market. Calls to the petitioner, China Cinda (HK) Asset Management, went unanswered on Friday.

Sunac shares in Hong Kong closed down 25.7% on Friday, after plunging as much as 29.7%, the biggest one-day percentage drop since Oct. 8, according to LSEG data.

Sunac's September 2025 bond was bid at 10.253 cents on the dollar, down from 12.875 cents on Thursday, while a September 2032 bond was bid at 7.85 cents, down from 10.75 cents.

The group confirmed the petition's submission and the hearing date in a filing on Friday, but it declined to provide further details.

MORE RESTRUCTURING POSSIBLE

Its liquidation petition comes as weak home sales in China raise the prospect of a new round of offshore debt restructuring in the property sector.

Sunac, which prior to the debt crisis that jolted the property sector in 2021 ranked among China's top developers by sales, was the first to complete a comprehensive overhaul of its $9 billion offshore debt in November 2023 after facing an liquidation petition in 2022 that was ultimately withdrawn.

Reuters reported this week Sunac has informed some of its offshore creditors it is unlikely to meet a September maturity deadline for its restructured bonds, due to uncertainties in the sector's sales recovery that could affect its ability to repay.

"I'm not surprised by the petition," said Alvin Cheung, associate director of Prudential (LON:PRU ) Brokerage Ltd in Hong Kong. "Chinese developers are not making much money, while they have to keep repaying a lot of debt."

Sunac, which had total borrowings of 277.4 billion yuan ($37.83 billion) as of the end of June according to its interim financial results, is also working to restructure $2.1 billion of yuan-denominated bonds.

Stocks across the Chinese property sector were down on Friday, with Cheung pointing to investors being increasingly concerned about further defaults.

Shares in Shimao Group and Agile Group both slipped more than 9%, while those in R&F Properties, KWG Group and China Aoyuan shed more than 8%.

Beijing has introduced many rounds of measures over the past years to revive China's economically crucial property sector, but they had little impact on homebuyer confidence in the world's second-largest economy.



Country Garden, a major developer that defaulted on its around $16.4 billion of offshore debt in 2023, said on Thursday it has proposed a deal to its offshore creditors that would cut its debt by 70% in a restructuring. The proposal includes options for creditors such as converting bonds into cash with a 90% haircut, or receiving new debt instruments with delayed maturity.

($1 = 7.3319 Chinese yuan renminbi)

Source: Investing.com