Started US$3.9 billion overseas debt restructuring What is the "confidence" of Sino-Ocean Group?

Per reporter: Chen Li Per editor: Wei Wenyi

Sino-Ocean Group's overseas debt "time for space" road has begun.

On the morning of September 15, Sino-Ocean Group (HK03377, stock price HK$0.55, market value HK$4.189 billion) announced that considering the current industry situation and the company's sustainable development in the future, the company will start a comprehensive restructuring of overseas debt, and hire Houlihan Lokey (China) Co., Ltd. as financial advisor and Sidley Austin as legal counsel. In order to promote overall debt management, the company will suspend the payment of all overseas debt, and eight overseas existing bonds (totaling US$3.92 billion) will be suspended from today, just the day after Sino-Ocean Group paid the first payment of "18 Sino-Ocean 01". The company was previously one of the few uninsured real estate companies in the industry, and from 2022 to now, the company has repaid nearly 20 billion yuan in the open market.

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In fact, debt restructuring is a positive superposition of creditors and debtors' expectations for future development value, which is an effective means to promote win-win results. At present, debt restructuring has become one of the important ways for listed companies to get rid of operational difficulties and achieve normal operation.

To date, there has been no material breach

It should be noted that Sino-Ocean Group has not yet defaulted materially and is still one of the very few uninsured housing enterprises in the industry. Public information shows that from 2022 to the present, Sino-Ocean Group has repaid nearly 20 billion yuan in the open market, and has been working hard to "ensure credit".

Just a month ago, on August 17, Sino-Ocean Group's three US dollar bond coupon rollovers due in 2024, 2027 and 2029 were approved. The most recent US dollar bond maturities in July 2024.

On August 31, the principal and interest payment arrangement plan of the 2 billion yuan bond "18 Sino-Ocean 01" was also approved by 54.1184% of the holders, reaching a default exemption. Just the day before (September 14), the first payment of "18 Ocean 01" was also remitted.

Taking the initiative to carry out overseas debt restructuring at this time is the choice of Sino-Ocean Group after many considerations. In the announcement, Sino-Ocean Group said that in view of the rapid decline in the company's sales, the increasing uncertainty of asset sales, and the continuous restrictions on various financing activities, the group believes that the best way out is to carry out a comprehensive restructuring of overseas debts.

"Applying for debt restructuring in advance shows that Sino-Ocean Group is taking proactive steps to cope with the current liquidity pressure." In an interview with the "Daily Economic News" reporter, Bai Wenxi, chief economist of IPG China, said that compared with some enterprises that have exploded, Sino-Ocean Group's financial situation is relatively good, so it has the ability and opportunity to take proactive actions to resolve problems in advance.

In fact, before that, more than 50 real estate companies, including Sunac China, Aoyuan and Fantasia, had carried out overseas debt restructuring. At the beginning of this year, Kerry said that this year will usher in the examination of housing enterprises' debts, and it is difficult to solve the urgent need to "borrow new to repay the old" or extend the period one by one, and the overall debt restructuring has become a breakthrough for more and more housing enterprises to resolve debt problems.

"By restructuring debt, you can not only reduce short-term financial pressures for companies, but also gain more time to develop and implement viable financing and business strategies." Bai Wenxi pointed out that this can also help enterprises reduce interest expenses, reduce corporate liquidity pressure, and improve the corporate debt structure to make it more reasonable, which is conducive to the long-term development of enterprises.

The two major countries have shareholder endorsements

Today, Sino-Ocean Group is facing whether the debt restructuring can be successfully passed. Prior to this, there were also real estate enterprises with difficulties in promoting debt restructuring, and some real estate enterprises were relatively smooth. This mainly depends on the company's own qualifications, if there is no problem with the company's fundamentals, the product has a reputation in the industry, and the debt disposal will be easier.

As far as Sino-Ocean Group is concerned, in the past period, in order to maintain its credit in the open market, the company raised funds through the sale of assets and the issuance of REITs for financing, and repaid nearly 20 billion yuan in the open market. In Sino-Ocean's view, protecting asset value, basic operations, and "ensuring delivery" are the focus of work.

Specifically, Sino-Ocean Group's sales exceeded 40 billion yuan in January ~ August this year, and the trading caliber ranked among the top 25 (top 25) in the industry. In key cities such as Tianjin, Jinan, Dalian, Zhongshan and Wuxi, Sino-Ocean Group's sales ranked among the top ten in the market. As of the first half of this year, the company's land reserve is 40.951 million square meters, and it is mainly located in core first- and second-tier cities.

In terms of delivery, in the first eight months of this year, Sino-Ocean Group successfully delivered 23,000 residential units in 27 cities including Shanghai, Shenzhen, Guangzhou, Wuhan and Hangzhou.

Not only that, the attitude of Sino-Ocean Group's major shareholders has also become the focus of attention from the outside world.

According to public information, as the two major shareholders of Sino-Ocean Group, about 60% of the shares of Chinese Life and Big Insurance are state-owned after the equity penetration. At the beginning of the year, the two major shareholders set up a special working group to complete the investigation of Sino-Ocean Group's asset status and operation, and confirmed that Sino-Ocean Group was affected by the industry, there was a phased liquidity risk, and the company's fundamentals were fine.

At the Chinese Life Interim Results Conference on August 24, 2023, Chinese Life said that it is highly concerned about the operation of Sino-Ocean Group and the risk situation it faces in the near future, and the company conscientiously performs its duties as a shareholder and urges Sino-Ocean Group to do its best to operate smoothly and resolve risks.

"The shareholders of the two state-owned insurance companies have brought strong capital and resource support to Sino-Ocean Group, and these shareholders may provide additional capital support to help the company tide over the difficulties during the debt restructuring process." Bai Wenxi said that the background of shareholders may also enhance creditors' trust in the company, which is conducive to the smooth progress of debt restructuring.

It should be pointed out that since the end of 2022, in order to boost market confidence, many departments of the central government have issued documents to support the development of housing enterprises from credit, bonds, equity and other aspects, and the direction of relief has also changed from the previous "rescue projects" to "rescue projects and rescue enterprises coexist", which has promoted the promotion of the debt restructuring plan for housing enterprises to a certain extent. In recent times, local policies have continued to make efforts, and the property market in many places has shown signs of recovery, which has also given hope to housing companies in distress.

However, for Sino-Ocean Group, whether it can take effective measures to resolve the debt problem has become the focus of its current debt restructuring work. "This requires enterprises not only to formulate a feasible debt restructuring plan, but also to strengthen operation management, optimize asset structure and other measures to improve the comprehensive strength and market competitiveness of enterprises." At the same time, strengthening communication and coordination with shareholders and creditors is also one of the important ways to resolve the debt problem. Bo Wenxi suggested.

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