Chinese Builder Sino-Ocean Seeks Debt Plan Approval in London

Chinese property developer Sino-Ocean Group Holding Ltd. is seeking approval for its debt restructuring plan in the UK, aiming to address its financial turmoil and avoid liquidation. The company, which defaulted on offshore borrowings in September 2023, is facing a winding-up petition filed by the Bank of New York Mellon in Hong Kong's High Court. Sino-Ocean has been working to garner support from creditors, with a lender group representing about half of the company's Class A debt either entering into a restructuring support agreement or going through internal procedures to obtain relevant approvals.

The proposed restructuring plan divides creditors into four classes, with varying terms offered to each class. Class A, representing about half of the company's Class A debt, is expected to support the plan, as they will receive a significant portion of the new financing instruments. An ad-hoc group of creditors, holding more than 25% of the debt in at least two of the classes, is strongly against the proposal and has called for terms to be improved, including increased upfront payments and a reduction of the haircut that creditors are expected to take in the plan. The ad-hoc group has also demanded that major shareholder China Life Insurance Co. bolster support for Sino-Ocean.

Sino-Ocean's pursuit of a restructuring plan in the UK is driven by several key factors, including defaulted debts, lack of cash flow, tightening financing requirements, asset disposal, and the desire to pursue a parallel restructuring process. The company aims to address the concerns of different creditor groups by dividing them into classes and offering varying terms. However, the ad-hoc group of creditors remains strongly against the proposal, highlighting the need for further negotiations and potential adjustments to the plan.

The UK court's decision on Sino-Ocean's restructuring plan could have significant implications for the company's future and the broader Chinese property market. A favorable decision could boost creditor confidence and market sentiment, while an unfavorable decision could further erode confidence and negatively impact market sentiment. The outcome of this case could also influence the attractiveness of the UK as a venue for cross-border restructurings involving Chinese companies and set a precedent for future restructuring cases. Additionally, the decision could impact regulatory and policy responses in China and other jurisdictions, as well as Sino-Ocean's operations and contagion risk to other Chinese property developers.

In conclusion, Sino-Ocean Group Holding Ltd. is seeking approval for its debt restructuring plan in the UK, aiming to address its financial turmoil and avoid liquidation. The proposed plan aims to address the concerns of different creditor groups by dividing them into classes and offering varying terms. The UK court's decision on the plan could have significant implications for the company's future and the broader Chinese property market, as well as cross-border restructurings involving Chinese companies and regulatory responses.