(Yicai) May 12 -- Jinke Property Group’s shares surged after a court in China gave the green light to the troubled Chinese developer’s debt restructuring plan, making it the largest ever in China’s real estate industry.

Jinke [SHE: 000656] closed up 4.7 percent at CNY1.56 (22 US cents) a share in Shenzhen today, giving it a market capitalization of CNY8.3 billion (USD1.15 billion). Under bourse rules, the stock is classified as facing significant financial risks, so its daily trading range is capped at 5 percent.

The debt restructuring plans for Jinke and its wholly owned subsidiary Chongqing Jinke Real Estate Development have been approved by the Chongqing Fifth Intermediate People’s Court and will now proceed, the developer said yesterday.

It is the largest judicial reorganization in China’s real estate sector to date, as the Chongqing-based builder has CNY147 billion (USD20.4 billion) in debt and more than 8,400 creditors.

If executed smoothly, the reorganization will help optimize its asset-liability structure, enhance sustainable operations and profitability, and positively impact this year’s financial metrics, Jinke said.

After exhausting its liquidity, Jinke applied for bankruptcy reorganization with the court in February last year, becoming the first major developer to voluntarily enter judicial restructuring. Last November, Jinke named a consortium led by Shanghai Pinqi Management Consulting and Beijing Tianjiao Lvyuan Real Estate Development as its strategic restructuring investor.

Jinke later secured a CNY2.6 billion (USD359 million) capital injection from more than 20 investors, including state-owned China Great Wall Asset Management and Sichuan Development Securities Investment Fund Management.

Under the reorganization plan, those funds will go first to paying employee wages and taxes, and will also be used for operational reserves, with the remainder allocated to debt repayment. Outstanding debts will be settled through Jinke shares and trust beneficiary rights.

Hit hard by the downturn in China’s real estate sector, Jinke has posted losses since 2022, amassing CNY62.1 billion (USD8.6 billion) of red ink over the past three years. In the first quarter of this year, its net loss widened 39 percent to CNY1.6 billion from a year ago, while revenue plunged 90 percent to CNY753 million (USD104 million).

The firm intends to shift from being a traditional developer to a comprehensive real estate operator focused on asset management and operations, its annual earnings report said.

Editor: Tom Litting