Sino-Ocean Group Holding Ltd heads to the court in Hong Kong on Wednesday to defend itself against a liquidation petition after months of rising tensions with a group of bondholders.

The state-linked builder, once considered one of the stronger names among China’s developers, is under pressure to show the court that it has made progress on its restructuring plans.

Tensions have been rising between Sino-Ocean and a key group of bondholders over the details, and they remain locked in a contentious standoff. That raises the stakes for the builder heading into the hearing. Companies that are unable to resolve disputes with creditors face the risk of eventual liquidation, as was the case with China Evergrande Group earlier this year. 

Sino-Ocean said this week that more than 75% of a group of creditors holding loan facilities has acceded to a restructuring proposal it delivered in July. Under the proposal, Sino-Ocean plans to restructure about US$5.6 billion into US$2.2 billion of new debt. Remaining claims would be exchanged into mandatory convertible bonds or new perpetual securities.

However, the company didn’t disclose its support levels among bondholders. The proposed restructuring divides creditors into four classes, one for loan creditors and three for noteholders. 

The wind-up petition against Sino-Ocean was filed on behalf of the group of bond creditors in June in relation to the non-repayment of a 3.25% dollar security due 2026, issued by the developer’s unit and guaranteed by the company.

The group last month sent a counter proposal to the defaulted builder’s restructuring plan. That plan adds a cash payment option for all debt holders, and includes a smaller haircut and a higher interest rate than Sino-Ocean had originally proposed, Bloomberg earlier reported.

But the group’s proposed revisions are seen by the company as beyond its ability to meet and are unlikely to be adopted.

Sino-Ocean has several hundred projects in China, and the country’s property slump continues to weigh on sales. For the first seven months of the year, contracted sales tumbled 47.3% compared to the year-earlier period. It had total cash resources of 4.7 billion yuan (US$663 million or RM2.9 billion) as of end-June 2024, according to its latest interim result. 

The developer is among a select group of defaulters with Chinese state-owned companies as major shareholders. China Life Insurance Co, one of the country’s biggest state-owned insurers, owns 29.59% of the builder, according to its latest annual report. 

  - Bloomberg