Chinese Property Developers Brace for Onshore Debt Restructuring in 2025
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Chinese property developers are gearing up for a wave of onshore debt restructuring in 2025, marking a significant shift in their approach to tackling the sector's ongoing liquidity crisis, reports Reuters. While offshore debt restructuring efforts gained momentum in 2022, developers have repeatedly sought to extend maturities on onshore bonds, hoping for an improvement in cash flow. However, with persistent weakness in housing demand and the broader economy, this strategy is no longer considered viable.
Sunac, a major developer, is leading the charge. The company is close to finalizing a landmark deal to restructure yuan bonds, which could pave the way for similar agreements across the sector. The developer is aiming to cut $2.1 billion in onshore bond debt by more than half, having already secured sufficient support from bondholders for two of the 10 bonds it plans to restructure.
"There's no new liquidity and no new lending and sales haven't improved," says Glen Ho, national turnaround & restructuring leader at Deloitte, to Reuters. "The focus for 2025 will be onshore debt restructuring."
Following Sunac's lead, Logan Group is set to begin discussions with bondholders in January regarding a comprehensive onshore debt restructuring. The company faces repayments of 2.4 billion yuan ($330 million) next year and is expected to seek significant losses from bondholders.
CIFI Holdings is also considering a debt revamp, but the success of Sunac's restructuring will be a key factor in their decision. Several other developers, including Country Garden, are facing significant onshore bond payments in 2025.
The shift towards onshore debt restructuring indicates a recognition that the sector's financial health is unlikely to improve in the near term. Authorities have implemented various measures to support the sector, such as cutting mortgage rates and minimum down-payment ratios, but these have not fundamentally changed the developers' financial positions.
"I don't think it's going to be easy for Sunac to get all bondholders to sign off on the deal," says a senior executive at a property developer to Reuters. "Every developer is watching. If it manages to cut debt, we'll want to do it too."
Sunac's restructuring effort, if successful, will mark the first instance of a company-led restructuring of yuan debt with significant haircuts in the property sector. This could signal a change in the government's stance, prompting onshore creditors to share some of the developers' financial burden.
The Chinese property sector's overall debt burden is substantial, estimated at around $12 trillion in 2023. The upcoming wave of onshore debt restructuring is expected to be a defining feature of the sector in 2025.