Chinese developer Sino-Ocean seeks to extend interest payment deadline on 3 billion yuan onshore bond

Sino-Ocean plans to convene a bondholders’ meeting on Monday to seek a two-month grace period on the coupon of a 3 billion yuan note due next Thursday
Developer says it has arranged funds to repay US$3.8 million of interest on a green bond maturing in April 2025

China property

Yuke Xiein Beijing

Published: 1:29pm, 13 Oct, 2023

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The liquidity stress in China’s property sector is showing no signs of easing, with many developers working on restructuring their debt while seeking to extend bond repayments even as defaults continue to mount.

Struggling mainland Chinese developer Sino-Ocean Group Holding said it plans to seek creditors’ approval to extend interest payment on an onshore bond due October 19, but said it would service the interest on an offshore bond due October 26.

Sino-Ocean said in a filing to the Hong Kong stock exchange on Friday that it plans to convene a meeting on Monday, where it will seek consent from bondholders for a two-month grace period on the interest payment on the 3 billion yuan (US$411 million) note maturing on October 19, 2025, issued by wholly owned subsidiary Sino-Ocean Holding Group (China).

The grace period will not trigger default provisions, and “no default interest will be imposed during the postponed repayment period”, the statement said. Trading in the bond has been suspended since Tuesday because of uncertainty over the repayment plan.

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Last month, Beijing-based Sino-Ocean said it was freezing repayments of all its offshore debt as part of its “holistic debt management” and that it was seeking consent from bondholders to extend the maturity of three dollar bonds due between 2024 and 2029. Sino-Ocean had 91.9 billion yuan of borrowings on June 30, with nearly 43 per cent denominated in foreign currencies, according to its latest interim report published last month.

The sector’s prospects have not improved despite a slew of recent measures by policymakers to lift the housing market. China’s average daily home sales during the golden week holiday, traditionally a peak period for new-home sales, slumped nearly 20 per cent from a year earlier, based on floor area, according to a Reuters report, citing data from China Index Academy.

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Tinkering with interest rates or mortgage rules will not return China’s real estate sector to heath, according to Brock Silvers, managing director at Kaiyuan Capital in Hong Kong.

“There’s little incentive for private developers to make further dollar bond payments until a company or sectoral reorganisation is imminent,” Silver said. “Given an extremely implausible maturity schedule over the next 15 months, markets should expect more such news to come.”

Sino-Ocean in a separate filing on Thursday evening said it plans to pay interest amounting to US$3.8 million on a green note due April 26, 2025. The note was issued by Sino-Ocean Land Treasure IV, with Sino-Ocean Group’s assets serving as collateral.

Sino-Ocean Group said the plan to arrange interest payments reflects its “purpose of formulating solutions to the group’s debt issues based on the different rights of different stakeholders”, adding that it would continue to “actively formulate debt restructuring plans to provide the group with a sustainable capital structure”.

Sino Ocean has over 600 projects in more than 80 cities in China, including high-end office buildings and shopping malls, according to its interim report.

In the first half of 2023, the developer’s sales amounted to 35.66 billion yuan, a year-on-year decline of 17 per cent. Revenue fell 11 per cent to 20.8 billion yuan, with the company recording a net loss of 125 million yuan for the period.

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