(Yicai) Nov. 6 -- Sunac China Holdings said it has obtained court approval for its USD9.6 billion offshore debt restructuring plan, a move that is expected to eliminate the Chinese developer’s outstanding liabilities once completed.

The plan to turn offshore creditors into shareholders was signed off by the High Court of Hong Kong, the Tianjin-based company announced yesterday.

Under the plan proposed in April, Sunac will issue two types of mandatory convertible bonds to offshore creditors. The proposal reached the required 75 percent support rate in June and hit 98.5 percent in October.

The approval will likely make Sunac the first major Chinese builder to complete its offshore debt restructuring process since the country’s real estate crisis began in 2021.

Between 2009 and 2014, Sunac vaulted from a mid-sized builder into one of China’s top 10 developers. But that rapid growth came with hidden risks. The company defaulted on its debt in May 2022, after the property market slumped. In November 2023, Sunac completed its first onshore and offshore debt restructurings, involving about CNY90 billion (USD12.6 billion).

Sunac’s first restructuring plan had relied on a ‘debt reduction plus extension' approach, but the downturn in the property sector meant it failed to fully alleviate the firm’s debt crisis. This second restructuring takes a more radical 'debt-to-equity conversion’ approach.

After gaining by as much as 3.4 percent in Hong Kong trading earlier today, Sunac's shares [HKG: 1918] ended unchanged at HKD1.49 (19 US cents) apiece.

In January, Sunac secured a deal to halve its CNY15.4 billion (USD2.1 billion) onshore debt. The firm said it would rearrange the principal and interest repayments for all 10 bonds after their holders agreed to its second onshore debt restructuring plan.

Even after debt-restructuring approvals, stressed developers still face much pressure to adjust their balance sheets, according to the China Index Academy, a major real estate research institution. As a result many are shifting toward asset-light management services to restore their ability to generate cash at minimal cost.

Sunac is on track to meets its annual sales target of more than 50,000 new homes this year, according to data the firm released previously.

Its luxury project One Sino Park in Shanghai's central Huangpu district has sold over CNY22 billion (USD3 billion) of properties since the start of the year, while its construction management platform signed enough new deals in the first three quarters to rank 15th in the sector.

Editors: Tang Shihua, Futura Costaglione