Chinese developer Shimao trades flat after issuing plan to revamp offshore debt

HONG KONG (Reuters) – Shares in Chinese property developer Shimao Group were flat on Friday after it issued a restructuring plan to reduce up to $7 billion in offshore debt, becoming the latest developer in China to try to revamp its debt.

The developer, with around $11.7 billion in offshore notes, bonds and other credit facilities has been pushing forward plans to revamp its debts over the past few months, Shimao said in a filing to the Hong Kong Stock Exchange late on Thursday.

It has proposed to a key group of creditors to exchange some debt for new loans with maturities up to nine years, new senior secured debts and equity-linked instruments, it said.

Shimao plans to decrease its debt by approximately $6 billion to $7 billion “to enhance the group’s financial strength and business operations”, the filing said.

Following the filing, Shimao was trading flat on Friday morning, while the broader Hong Kong index tracking Chinese developers dipped 1.7%.

No definitive agreement on the offshore restructuring has been made with creditors, the filing said.

Chinese developers are still struggling with declining property sales, while investors remain concerned about spillover to China’s broader financial system and harm to its economic growth outlook. China’s property sector accounts for roughly a quarter of the world’s second-largest economy.

Shimao, the first major Chinese developer to kick off formal negotiations on restructuring terms with creditors, initially proposed a plan last August to repay its offshore debt over a period of three to eight years.

The Shanghai-based developer, which defaulted on its first offshore payment last July, has been seeking to sell one of its hotels in Hong Kong since March to fetch at least $828 million as part of its debt recovery plan.

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