Four Chinese developers face make-or-break week in liquidation cases

HONG KONG - Four defaulted Chinese developers are headed into Hong Kong court hearings on liquidation demands next week, marking one of the busiest such stretches ever for the sector.

The focus is on Kaisa Group Holdings, once a symbol of the boom years in China’s credit markets, which has its hearing on June 24. That is followed on June 26 by Shimao Group Holdings, whose landmark projects include five-star hotels in Shanghai.

The companies must show they have made progress in restructuring their debts or run the risk of judges ordering their assets to be sold off to repay creditors.

DaFa Properties Group will face Hong Kong judges for the third time on June 24, while Redsun Properties Group will have its second hearing on June 26. A number of developers including Country Garden Holdings are scheduled to have hearings in July.

Hong Kong has become the epicentre of the financial turmoil facing developers

amid a multiyear crisis in China’s property sector

, after once acting as a gateway for investors to access their high-yield offshore bonds.

At least five builders, including heavyweight China Evergrande Group, have already received wind-up orders from the city’s high court.

Dexin China Holdings, a home-builder in the affluent eastern coastal region, last week became the latest developer to be liquidated in a case in Hong Kong. Judge Linda Chan refuted the company’s argument about its ongoing negotiations, saying it was “not good enough” and “nothing had been put in writing”.

The tumult is spreading, with Sunshine 100 China Holdings getting a similar petition this week.

China’s government in recent months has

stepped up measures to rescue the debt-laden property sector

, including relaxing mortgage rules and asking the local authorities to buy unsold homes.

That has helped a Bloomberg index of Chinese high-yield dollar bond, which is heading for an eighth month of gains on a total return basis, the longest winning streak in almost five years.

But despite the rise in junk bond prices among some developers, a large chunk of the market remains deeply distressed. US dollar notes issued by defaulted builders such as Kaisa and Shimao, which have been removed from the Bloomberg index, are still trading below five cents on the dollar.

Kaisa will be seeking to fight off its liquidation in a process that was delayed multiple times since a petition was filed about 11 months ago. The developer has yet to publicly present a restructuring proposal more than two years after defaulting on its offshore bonds.

But its lawyer said in April the ad hoc group of creditors and the firm had made progress in reaching an in-principle agreement.

Shimao will take part in a wind-up hearing for the first time, after creditor China Construction Bank (Asia) filed a petition in April. That was almost two years after the builder defaulted on its offshore debt in July 2022.

Shimao has released an initial restructuring plan offering four options to its offshore creditors. A key creditor group that holds more than 25 per cent of the company’s offshore bonds outstanding told fellow noteholders in March that it will vote against those terms. BLOOMBERG