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China builder Jiayuan gets court order to liquidate assets
A third Chinese developer faces court-ordered liquidation after losing a winding-up case in Hong Kong, adding to a small but growing number of legal victories for creditors involving overdue debt.
Jiayuan International Group Ltd. received the order Tuesday, nearly eight months after a petition was filed by a bondholder involving $14.5 million allegedly due on a dollar note. Two peers got such orders last year from courts in Hong Kong, a gateway for investors to access mainland issuers’ high-yield offshore bonds.
Chinese junk dollar notes have slid into unprecedented distress the past two years, with defaults soaring to record heights and new-home sales plunging in 2022 amid builders’ liquidity woes. Frustrated with an often-protracted debt-restructuring process, overseas creditors have increasingly turned to the courts for quicker debt recovery.
A Jiayuan representative on Tuesday requested a two-month adjournment in the case and expressed openness to an even-shorter one. But Judge Linda Chan declined the offer. A representative for The Hong Kong and Shanghai Banking Corp., a supporting creditor in the case, demanded the developer’s immediate winding up.
Jiayuan, which has fallen out of the top 100 builders in China based on contracted sales, in August first proposed to exchange its dollar notes in order to extend maturities. But after repeated extensions, the company dropped the effort last week and said it will instead “seek a more holistic resolution” by proceeding with a plan contemplated in its restructuring support agreement.
“The so-called restructuring is really not a concrete proposal, but just an idea put forward by the company,” Chan said Tuesday. The HSBC representative said “there’s a lack of feasibility” in the proposal. “There’s no promise of funding, no comprehensive plan,” she said.
The Jiayuan representative told the court that about 70% of bondholders by value backed the exchange offer, near the 75% support level needed for a holistic restructuring. “The amount of noteholders accepting the EO far outstrips the creditors who appeared and support the petitioner today,” she said. “There is a silent majority. It shows there is a certain level of support for a restructuring.”
Deloitte had done a liquidation analysis for offshore bondholders. A representative for Jiayuan creditor OCM APDO Gene Investments Pte said during Tuesday’s hearing that the recovery rate for unsecured creditors in such a scenario would be 1.83%, meaning the builder has a fundamental problem that a debt-payment extension wouldn’t solve.
Jiayuan dollar bonds remained at 10 cents or less on Tuesday, according to prices compiled by Bloomberg. The builder’s Hong Kong-listed shares have been halted for the past month, after it failed to release 2022 results.
A number of cash-strapped Chinese developers, including heavyweights such as China Evergrande Group, face winding-up petitions. Two other cases against Jiayuan were dismissed by a Hong Kong court or withdrawn last year.
Chinese junk dollar notes have slid into unprecedented distress the past two years, with defaults soaring to record heights and new-home sales plunging in 2022 amid builders’ liquidity woes. Frustrated with an often-protracted debt-restructuring process, overseas creditors have increasingly turned to the courts for quicker debt recovery.
A Jiayuan representative on Tuesday requested a two-month adjournment in the case and expressed openness to an even-shorter one. But Judge Linda Chan declined the offer. A representative for The Hong Kong and Shanghai Banking Corp., a supporting creditor in the case, demanded the developer’s immediate winding up.
Jiayuan, which has fallen out of the top 100 builders in China based on contracted sales, in August first proposed to exchange its dollar notes in order to extend maturities. But after repeated extensions, the company dropped the effort last week and said it will instead “seek a more holistic resolution” by proceeding with a plan contemplated in its restructuring support agreement.
“The so-called restructuring is really not a concrete proposal, but just an idea put forward by the company,” Chan said Tuesday. The HSBC representative said “there’s a lack of feasibility” in the proposal. “There’s no promise of funding, no comprehensive plan,” she said.
The Jiayuan representative told the court that about 70% of bondholders by value backed the exchange offer, near the 75% support level needed for a holistic restructuring. “The amount of noteholders accepting the EO far outstrips the creditors who appeared and support the petitioner today,” she said. “There is a silent majority. It shows there is a certain level of support for a restructuring.”
Deloitte had done a liquidation analysis for offshore bondholders. A representative for Jiayuan creditor OCM APDO Gene Investments Pte said during Tuesday’s hearing that the recovery rate for unsecured creditors in such a scenario would be 1.83%, meaning the builder has a fundamental problem that a debt-payment extension wouldn’t solve.
Jiayuan dollar bonds remained at 10 cents or less on Tuesday, according to prices compiled by Bloomberg. The builder’s Hong Kong-listed shares have been halted for the past month, after it failed to release 2022 results.
A number of cash-strapped Chinese developers, including heavyweights such as China Evergrande Group, face winding-up petitions. Two other cases against Jiayuan were dismissed by a Hong Kong court or withdrawn last year.
