Linklaters advises the ad hoc group of creditors on Sunac China’s US$10.2bn offshore debt restructuring

Linklaters has advised an ad hoc group of bondholders and lenders (AHG) on the financial restructuring of Sunac China, a Hong Kong-listed property developer in China. The Restructuring Effective Date occurred on 20 November 2023 after each of the Restructuring Conditions were satisfied. This is the largest restructuring of a Chinese property company to date and provides a tool kit for the restructuring of other companies in the sector.

Linklaters advised the AHG, which holds over 30% of Sunac China’s outstanding offshore debt of more than US$10.2bn, on entry into a restructuring support agreement to facilitate the implementation of the restructuring via one or more schemes of arrangement in Hong Kong, together with recognition proceedings in other relevant jurisdictions.

The restructuring will, amongst other things, allow the company to extend the maturity of its offshore debt by two to nine years and de-lever via conversion of certain of its existing indebtedness into a US$1bn convertible bond; up to US$1.75bn mandatory convertible bonds (at the election of creditors); and 14.75% of the shares of Sunac Services (at the election of creditors). The restructuring also provides for equitisation of certain shareholder loans, cash sweeps from various onshore and offshore asset disposals and enhanced governance and other information rights.

The restructuring provides Sunac China with a long-term, sustainable capital structure that enables the company to stabilise its business and to protect value for all stakeholders.

Linklaters cross-border and multi-jurisdictional team was led by Restructuring & Insolvency partner James Warboys, with support from associate Ewan Smith, managing associate Max Krasner (all London), Capital Markets partner Taiki Ki, counsel Christian Felton and associates Jun Tang and Shuopeng Yin, and Restructuring & Insolvency associates Mustafa Rehman and Joanne Tsoi (all Hong Kong SAR).

The transaction is testament to Linklaters’ market-leading, global restructuring capabilities in Asia and London. It also reflects the cross-practice team’s ability to advise ad hoc groups of creditors and to coordinate highly complex multi-jurisdictional large-cap restructuring transactions.