Distressed Chinese developer Powerlong Real Estate Holdings unveiled the preliminary terms of a restructuring agreement with an ad hoc group (AHG) of creditors late on Thursday, a deal which is expected to give the Shanghai-based company a brief respite from the ongoing debt crisis.
The builder said it had agreed with the AHG on restructuring its offshore bonds, which gave bondholders options such as swapping their holdings for shares in the company’s subsidiary Powerlong Commercial Management Holdings or for convertible bonds of the company, according to a filing made to the Hong Kong stock exchange.
“The company would like to update its shareholders and potential investors on the significant progress of the company’s plan for a holistic solution to certain offshore debt of the company,” it said.
The aggregate amount of the options will not exceed US$715.7 million, the term sheet showed. Other options included replacing their holdings with newly issued medium-term notes, long-term notes, and a fresh loan, with the maximum amount of entitlement under the various options ranging from US$238.5 million to US$588 million.
The AHG members hold about 27 per cent and 35.6 per cent of the aggregate outstanding principal amount of the scheme debt and the existing notes, respectively, the statement said.
The statement said the company and the AHG agreed on “certain key terms of the proposed holistic solution and undertook to work together in good faith and use commercially reasonable endeavours” to agree further on detailed terms in a restructuring support agreement (RSA) on or before 23 February next year.
The effective date of the restructuring shall be no later than 30 September 2024 and shall occur as soon as reasonably practicable and within 10 business days of the conditions of the RSA being satisfied or waived, it added.
“The execution of the term sheet by the company and the AHG represents an important milestone in the progress made by the parties of achieving the holistic solution,” the company said.
The move came after the company in late November said it had failed to repay offshore debt due to a liquidity crunch, which could trigger cross defaults on other borrowings, an event of default under terms with offshore banks and other borrowings, stirring market sentiment for a deeper crisis.
Bids on Powerlong’s 5.95 per cent dollar bonds due April 2025 have edged down by a cent since November-end to 7.35 cents on the dollar, according to data compiled by Bondsupermarket.
Shares of Powerlong were up 4.4 per cent to HK$0.72 on Friday. It is still down 52 per cent since the start of this year.
The country’s property sector remains mired in distress despite easing measures launched by authorities in a bid to revive the market and reduce developers’ liquidity pressures.
Markets have been cool to these measures. Latest official data showed that China’s new home prices fell for the fifth straight month in November, with 59 out of 70 cities tracked by the National Bureau of Statistics posting declines compared with the previous month.