Sino-Ocean halts offshore debt repayments until restructuring implemented

In addition to the repayment halt, Sino-Ocean said that trading of all the offshore U.S. dollar securities guaranteed by the company on the Hong Kong bourse would be suspended until further notice with effect from Sept.

Chinese state-backed property developer Sino-Ocean Group Holding Ltd said on Friday it was halting repayments for all offshore debt until a restructuring is implemented and suspended trading of its U.S. dollar securities in Hong Kong.

The Beijing-based developer said it expected liquidity challenges to persist in the short-to-medium term and it believes a "holistic restructuring" of its offshore debt is the best way forward. "The group will continue to proactively negotiate with the relevant stakeholders of the group, including banks, noteholders and financial institutions, to extend the maturity of and/or restructure the relevant offshore debts," it said in a filing to the Hong Kong bourse.

In response to the repayment halt, credit rating agency Moody's on Friday downgraded Sino-Ocean's debt to "Ca" from "Caa2", with a negative outlook. The suspension of payments reflects the company's weak liquidity and constrained financial flexibility, and could also trigger a default and accelerate the repayment of its other debt obligations, Moody's said.

The rating agency expects the recovery prospects for Sino-Ocean's offshore bondholders to be low in a bankruptcy scenario, given its high debt leverage and a large amount of financing at the operating subsidiary level. In addition to the repayment halt, Sino-Ocean said that trading of all the offshore U.S. dollar securities guaranteed by the company on the Hong Kong bourse would be suspended until further notice with effect from Sept. 15.

Sino-Ocean's debt problems are the latest in a deepening debt crisis that has beset China's beleaguered property sector and rattled global markets. In August, Sino-Ocean said its proposal to extend the repayment of a 2 billion yuan ($278 million) onshore bond was voted down by creditors, but they had agreed to provide a one-month grace period for the payment.

On Friday, it also said it is working to ensure delivery of completed properties pursuant to pre-sale arrangements, the continuation of business operations, and delivery of current projects to protect the interests of home buyers, partners and all stakeholders. "The group respectfully requests that creditors allow the group some time to resolve the current liquidity issue and work with its advisers to formulate a plan," the developer added.

Sino-Ocean shares closed down 12.1% at HK$0.58 ($0.074) on Friday. That compared to a 0.75% gain in the benchmark Hang Seng Index. The company's shares are down 46.8% so far this year. ($1 = 7.8266 Hong Kong dollars)