Sunac China Holdings is a real estate developer led by billionaire Sun Hongbin. According to a Thursday filing at the Hong Kong Stock Exchange, it has defaulted on interest payments for an offshore bond of $742 million. It also appears unlikely to pay the other notes due in the future.
Sunac has fallen into default and failed to meet its financial obligations. This is in addition to China Evergrande Group, Fantasia Group Holdings, and other companies that have had difficulty accessing financing since Beijing cracked down upon the real estate sector. The government considers it too debt-laden and a risk to financial stability.
The country’s recent Covid epidemic and associated curbs are causing a severe hit to economic growth and homebuyers’ confidence. Sunac stated in the above filing that March and April contracted sales plunged by 65% year-on-year which “further exacerbated current liquidity constraints of this group.”
Sunac could not pay $29.5 million interest on its 7.95% senior note due Oct 2023. Sunac had a 30-day grace period that expired on Wednesday, but the payment deadline for coupon payments was originally set as April 11.
According to the company, creditors may demand immediate repayment of principal and accrued interest if the payment is not made. However, the company has yet to receive such demands from bondholders. Sunac also holds three additional dollar bond coupons due in April. These bonds also have 30-day grace periods for payment.
The filing stated that “Given current liquidity constraints by the group, there is no guarantee that the group will meet its financial obligations when due” or within the applicable grace periods.
Sunac cautioned that this could lead to enforcement actions by creditors. It appointed Houlihan Lokey, an investment bank, as its financial advisor. Sidley Austin is the legal advisor. It stated that it would seek to solve the liquidity crisis through accelerating sales and payments collection, asset dispositions, debt extension, and pursuing strategic investors.
Sun gave a $450,000,000 interest-free loan last year. Sunac also sold shares in its property management division and issued new shares. This announcement helped raise $953 million. He is a U.S. citizen and has seen his wealth drop more than 70% since 2021 to $2.5 billion. Sunac has stopped trading its shares since April 1 and stated that it couldn’t publish its annual reports on time in late March.