Chinese property developer Yuzhou unveils offshore debt restructuring plan, says has not defaulted on onshore debt

Chinese developer Yuzhou Group announced its debt restructuring plan, joining industry peers Evergrande Group, Sunac China Holdings, and Shimao Group, who are also seeking a revamp as sector conditions continue to deteriorate even as authorities roll out supportive policies.

The Hong Kong-listed property firm on Sunday night said in a filing that it is in active discussions with its offshore creditors and has formulated a preliminary restructuring proposal.

The Shenzhen-based company has offered three options to its creditors. Those opting for the first option can exchange the existing notes for new notes with a short-term maturity (STN) while those choosing the second option would receive medium term notes (MTNs), newly issued ordinary shares of the company and long term notes (LTN). The third option would involve swapping the notes for LTNs which bear zero interest but with no haircut to the outstanding principal amount of the existing notes.

“The company believes that the successful implementation of its offshore debt restructuring would allow it to right size its balance sheet and restore its capital structure to a healthy and sustainable level such that the group’s business would be able to continue as a going concern and thrive moving forward,” it said.

Analysts said there were other challenges ahead for the company.

“Debt restructuring alone cannot resolve the operational challenges of Yuzhou, which needs to rely on recovery in contracted sales over the long run to generate sustainable cash flow for future debt servicing,” Daniel Zhou, Moody’s Investors Service analyst told The Post. “In addition, the disagreements between Yuzhou and certain creditors on the proposal raise uncertainties on the timing of restructuring plan settlement and execution, which may further add to bondholders’ economic losses.”