By Clare Jim
HONG KONG (Reuters) -Sunac China shares and bonds plunged on Friday after a liquidation petition was filed against the property developer, adding to concerns over its business recovery and repayment ability despite an offshore debt restructuring in 2023.
The petition was filed by a unit of state-owned asset manager China Cinda Asset Management and a hearing is scheduled for March 19, the Hong Kong judiciary's website showed late on Thursday.
Many mainland developers, including China Evergrande (HK:3333) and Country Garden (HK:2007), have faced or are currently facing liquidation cases in Hong Kong since the property sector was hit by a liquidity crunch in 2021.
But most petitions have not been filed by state-owned companies and China Cinda's was made despite Chinese authorities repeatedly vowing to stabilise the struggling property sector and the stock market. Calls to the petitioner, China Cinda (HK) Asset Management, went unanswered on Friday.
Sunac shares in Hong Kong were down as much as 29.7% to HK$1.23 in morning trade on Friday, on course for the biggest one-day percentage drop since Oct. 8, according to LSEG data, before recovering some ground to trade 21% lower at midday.
A September 2025 bond was bid at 10.253 cents on the dollar, down from 12.875 cents on Thursday, while a September 2032 bond was bid at 7.85 cents, down from 10.75 cents.
Sunac confirmed the petition was filed against the company and the hearing date in a filing on Friday, but it declined to provide further details.
MORE RESTRUCTURING POSSIBLE
Its liquidation petition comes as weak home sales in China raise the prospect of a new round of offshore debt restructuring in the property sector.
Sunac, which prior to the debt crisis that jolted the property sector in 2021 ranked among China's top developers by sales, was the first to complete a comprehensive overhaul of its $9 billion offshore debt in November 2023 after facing an liquidation petition in 2022 that was ultimately withdrawn.
Reuters reported this week Sunac has informed some of its offshore creditors it is unlikely to meet a September maturity deadline for its restructured bonds, due to uncertainties in the sector's sales recovery that could affect its ability to repay.
"I'm not surprised by the petition," said Alvin Cheung, associate director of Prudential (LON:PRU) Brokerage Ltd in Hong Kong. "Chinese developers are not making much money, while they have to keep repaying a lot of debt."
Sunac, which had total borrowings of 277.4 billion yuan ($37.83 billion) as of the end of June according to its interim financial results, is also working to restructure $2.1 billion of yuan-denominated bonds.
Stocks across the property sector were down on Friday, with Cheung pointing to investors being increasingly concerned about further defaults.
Shares in Shimao Group and Agile Group both slipped more than 9%, while those in CIFI Holdings shed 8%.
Beijing has rolled out a raft of measures over the past year to revive the country's economically crucial property sector, but the measures have had little impact on homebuyer confidence in the world's second-largest economy.
Country Garden, a major developer that defaulted on its around $16.4 billion of offshore debt in 2023, said on Thursday it has proposed a deal to its offshore creditors that would cut its debt by 70% in a restructuring. The proposal includes options for creditors such as converting bonds into cash with a 90% haircut, or receiving new debt instruments with delayed maturity.
($1 = 7.3319 Chinese yuan renminbi)