Indebted Zhenro seeks to postpone restructuring

Defaulted developer Zhenro Properties Group is seeking to postpone a restructuring plan as its liquidity woes deepen amid a sales slump, slow asset disposals and the threat of a lawsuit from Ping An Insurance (Group) over a property-linked trust.

Zhenro planned to delay the implementation of a restructuring agreement and was seeking to vacate a May 2 court hearing related to it, the firm said in a filing with the Hong Kong stock exchange on Thursday.

The Shanghai-headquartered developer said it needed more time to consider the agreement in light of a “strained operating and funding environment” due to slumping contracted sales and slower asset disposals.

“The company requires more time to consider whether the commercial terms as currently presented in the [agreement] remain the appropriate solution to the group’s offshore indebtedness in order to secure a sustainable and viable business for the company in the long term,” it said.

Zhenro’s move came on the day a unit of Ping An, China’s largest insurer by market value, delayed repayment for a property-linked trust product worth 772.4 million yuan (HK$836.1 million).

The insurance giant cited the country’s property woes for the delay and said it would sue Zhenro, in which it invested.

Zhenro did not respond to a request for comment.

“The company and its advisers will continue to work on reaching a feasible outcome on the holistic restructuring of the offshore debts of the company that can secure the sustainable operations of the group for the benefit of all stakeholders,” the developer said in the filing.

Zhenro reported a net loss of 8.5 billion yuan for last year, 34 per cent narrower than its 2022 loss, as revenue increased by 50 per cent to 38.8 billion yuan. However, contracted sales plunged by 54 per cent on the year to 15.4 billion yuan.

The firm first defaulted in April 2022 when it missed interest payments on two US dollar bonds valued at US$20.4 million. As of the end of last year, it had failed to repay 14.58 billion yuan in principal and interest on senior notes, triggering 13.37 billion yuan in defaults.

In all, the developer had 61.86 billion yuan of interest-bearing debt outstanding as of December 31, with nearly 90 per cent of that due this year. It had just 1.71 billion yuan in cash and cash equivalent on hand as of the end of last year.

According to the restructuring plan, bondholders would receive four new notes with different tenors in exchange for their claim amount. Those who voted for the scheme would receive a consent fee of 0.15 per cent of the note’s face value.

Shares in Zhenro declined by more than 8 per cent to 4.5 HK cents in Hong Kong yesterday. The stock has lost half of its value so far this year.