Following Evergrande, Sunac Becomes Latest Major Chinese Developer to Seek US Bankruptcy Protection

Sunac, one of China’s prominent property developers, has filed for bankruptcy protection in the United States following approval from creditors to restructure nearly $10 billion in debt. This move comes shortly after Evergrande, another distressed Chinese developer, made a similar Chapter 15 filing in the U.S. after incurring substantial losses totaling $81 billion over the past two years.

Chapter 15 bankruptcy protection is invoked when an insolvency case involves multiple countries, facilitating cooperation between U.S. courts, debtors, and international jurisdictions in cross-border bankruptcy proceedings. For Sunac, this step could aid negotiations with foreign lenders as they work to revamp their debt.

Sunac China ranked as the 10th largest property developer in China by contracted sales in August, according to CreditSights. However, prior to its default in 2022, it held the third-largest position. Successfully reaching an agreement with foreign creditors could set a precedent for other distressed developers striving to stabilize their financial situations.

The Chinese high-end senior living market is poised for growth, with companies like Sino-Ocean Land Holdings Ltd expanding their senior living projects, offering specialized services tailored to seniors’ diverse health needs.

Evergrande, once a dominant Chinese developer, is also seeking to restructure its offshore debt but has faced challenges in winning over overseas creditors due to less favorable terms offered.

Sunac’s bankruptcy filing in the U.S. led to a 4.3% decline in its Hong Kong-listed shares, despite earlier gains. Like many Chinese real estate developers, Sunac has been grappling with a severe cash shortage amid a broader industry sales decline, leading to debt repayment challenges. Sunac’s total liabilities reached 1 trillion yuan ($137.6 billion) by the end of the previous year, with sales plummeting 50% in 2022 compared to the previous year.

While Chinese policymakers have introduced measures to support the struggling real estate industry, the key challenge remains revitalizing sales and improving the core business. Despite recent efforts, concerns persist, as evidenced by Country Garden, China’s largest homebuilder, teetering on the brink of default.

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