(Bloomberg) — Defaulted Chinese builder Sino-Ocean Group Holding Ltd. is entering a London court Wednesday for a three-day hearing, looking to exercise a legal mechanism allowing a debtor to potentially complete restructuring without creditors’ full approval.
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Company representatives will press for a court sign-off on its restructuring proposal, centered on turning about $5.6 billion of debt into new debt and other types of securities paid to creditors. Many bondholders oppose the terms, and a group of them will tout their proposals that they consider to be more favorable payouts.
Sino-Ocean is in London because it says its bonds are covered by English law. But the case is closely monitored by industry players in Asia because it is a prominent example of a Chinese debtor trying to tap a UK insolvency law. Known as a cross-class cramdown, it can impose restructuring terms on a dissenting class of creditors even without a required approval threshold.
The hearing is one in a flurry of insolvency-related showdowns involving Chinese builders that are scheduled this week, an inauspicious start as the country’s property crisis enters its fifth year with few signs of it letting up. If the court sides with Sino-Ocean, the company would clear a major hurdle in advancing its debt overhaul, and the ruling would serve as a case study for other builders considering the UK jurisdiction.
Class Treatment
Citing tight liquidity, the state-linked company defaulted on its dollar bonds and suspended payment on all its offshore borrowings in September 2023. A group of bondholders filed a petition in June seeking liquidation.
With property sales still sluggish, investors’ expectations of recovery from Sino-Ocean bonds are waning. Its dollar notes are trading around eight cents on the dollar this week, according to Bloomberg-compiled data.
One creditor group known as “Class A”, who are loan lenders, has largely approved the company’s restructuring plan. A Hong Kong court will hold a hearing on their debt talks.
Meanwhile, its bondholders, along with Class A creditors, will have to fight for their recovery in the parallel proceedings unfolding in London. Two of three bondholder groups in the case — categorized as classes B, C, D — are still short of approving Sino-Ocean’s plan. Class B has 47.7% of approval, while 34.9% of Class D has assented to current terms, according to a filing.
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