China’s Nation Backyard proposes deal to scale back offshore debt by $11.6 billion

By Clare Jim

HONG KONG (Reuters) -Nation Backyard has proposed a deal to its offshore collectors that can lower its debt by $11.6 billion, paving the way in which for the property developer to hunt extra time from the excessive court docket in Hong Kong to implement a restructuring plan.

The indebted developer has reached an understanding with a lender group made up of seven banks forward of the corporate’s liquidation listening to on Jan. 20 in Hong Kong, bringing it nearer in the direction of a restructuring of its offshore debt.

As soon as China’s greatest property developer, Nation Backyard (HK:2007) defaulted on $11 billion in offshore bonds in late 2023, deepening a debt disaster within the sector that had already skilled defaults by many builders, together with China Evergrande (HK:3333) Group.

Nation Backyard had $16.4 billion of offshore debt on the finish of 2023, together with $10.3 billion in bonds and three syndicated loans with an impressive principal quantity of $3.6 billion. Each are lined by the restructuring.

The proposal, introduced on Thursday, outlines choices for collectors, together with a conversion of debt into money with a 90% haircut or receiving new debt devices with delayed maturity.

Some choices embrace extending the maturity by as a lot as 11-1/2 years alongside selecting necessary convertible bonds and new debt devices.

“The corporate is especially happy with the curiosity proven by sure banks in supporting the corporate over the long run to navigate present challenges,” Nation Backyard mentioned.

It additionally mentioned its controlling shareholder, Chairperson Yang Huiyan, is contemplating changing her shareholder mortgage, with $1.1 billion excellent principal, into fairness within the group.

The negotiations over the definitive phrases of the proposal are nonetheless ongoing, the corporate mentioned.

Nation Backyard’s December contracted gross sales dropped 50% from the earlier 12 months to six.91 billion yuan ($942.43 million), based on a regulatory submitting.

The corporate confirmed a revised-down money move projection to some collectors when it submitted the preliminary phrases of its restructuring proposal to them, Reuters reported in November.

A protracted property market hunch has been weighing on builders’ skill to repay debt.

Smaller rival Sunac China has knowledgeable a few of its offshore collectors it’s unlikely to satisfy a September maturity deadline for its restructured bonds, sources mentioned, as weak gross sales increase the prospect of a brand new spherical of offshore debt restructuring within the property sector.

Nation Backyard will maintain a board assembly subsequent Tuesday to approve its overdue 2023 audited annual outcomes and 2024 unaudited interim outcomes.

Shares of the corporate have been suspended since April 2, 2024, pending the discharge of the monetary outcomes.

($1 = 7.3321 Chinese language yuan renminbi)