(Yicai) Dec. 18 -- Sunac China said it has reached agreements with creditors to fully discharge its remaining offshore obligations, a development that will make it the first Chinese builder to eliminate both onshore and offshore debt risks.

Once Sunac completes the restructuring of its remaining offshore debt and repays a loan to Chiyu Banking, the Beijing-based property developer will have fully addressed its debt risks, paving the way to restoring its creditworthiness and supporting long-term business operations, it said in a statement yesterday.

The restructuring of its last USD9.6 billion offshore debt is expected to be completed on or around Dec. 23, along with the issuance of mandatory convertible bonds to creditors, Sunac said.

Under the restructuring plan, creditors will either convert their bonds into Sunac shares at HKD6.80 (87 US cents) apiece within six months after the effective restructuring date, or at HKD3.85 (49 US cents) each between 18 and 30 months after the restructuring.

Based on an exchange rate of USD1 to HKD7.80, if all debt is converted to shares, Sunac is expected to issue more than 13 billion new shares. These, together with the additional 900 million shares from its previous domestic debt restructuring and team stabilization plan, will expand the total to over 24.5 billion from around 10.6 billion at the end of last year.

Sunac’s shares [HKG: 1918] finished unchanged at HKD1.30 (17 US cents) each in Hong Kong today. The stock has lost 44 percent of its value since the end of last year.

In the same statement yesterday, Sunac also said that it had reached a restructuring deal with its subsidiary Sanya Qingtian and Hong Kong lender Chiyu to address the company's only remaining debt outside the scope of the offshore debt restructuring, with an outstanding principal of HKD858 million (USD110.3 million).

Thirty-five percent of the principal will be restated as a loan with a 10-year extension period, with the remaining 75 percent deemed "irrevocably and unconditionally discharged" by way of the allotment and issue of new shares. Sunac will issue 279.2 million shares, equal to about 2.4 percent of its total, at HKD3.85 apiece.

Chiyu's direct holding company is Chiyu International Financial Holdings, a unit of Xiamen International Investment, which is fully owned by Xiamen International Bank.

After Sunac has completed both domestic and overseas debt restructurings, its overall debt servicing pressure will fall, saving the firm large annual interest expenses and supporting sustainable operations, said Liu Shui, corporate research director at the China Index Academy.

But Sunac’s future healthy development ultimately depends on the company itself, with a sustained sales recovery key to restoring cash flow and profitability, Liu noted. 

More importantly, Liu said that that although the company's high-end projects in Shanghai, Beijing, and other locations have shown strong sales, overall contracted sales still face pressure. Accelerating sales at other projects and unlocking remaining inventory assets are key issues Sunac needs to address, he pointed out.

Sunac's sales fell 25 percent to CNY33.9 billion (USD4.8 billion) in the first 11 months from a year earlier, with the contracted sales area plunging 44 percent to 1.12 million square meters, while the average contracted sales price climbed 34 percent to CNY28,700 (USD4,075) per sqm.

Editor: Futura Costaglione