Houlihan Lokey Advises Sino-Ocean Group
Houlihan Lokey is pleased to announce the successful restructuring of Sino-Ocean Group Holding Ltd.’s (Sino-Ocean) $6.3 billion of offshore indebtedness. Sino-Ocean is the first Chinese property developer to implement its restructuring via a U.K. Restructuring Plan (U.K. RP), where the court exercised the cross-class cramdown mechanism to bind dissenting creditors to the plan. As the exclusive financial advisor to Sino-Ocean, Houlihan Lokey helped the company reduce its offshore indebtedness by 65% to $2.2 billion, extend maturities by c. eight years, and retain its status as a state-owned enterprise (SOE).
Sino-Ocean is a real estate developer headquartered in Beijing, China, and is listed on the Hong Kong Stock Exchange under the ticker HKSE:3377. Sino-Ocean has developed and operated more than 600 residential and commercial projects in over 80 cities in China.
Since the second half of 2021, the Chinese real estate market has experienced a steep decline. Onshore and offshore financing channels have essentially been frozen for Chinese developers due to overarching investor concerns regarding the sector. These headwinds, coupled with a macroeconomic downturn in China, exerted immense pressure on Sino-Ocean’s liquidity and its ability to service debt. As a result, Sino-Ocean entered into a holistic restructuring in September 2023.
Houlihan Lokey was retained by Sino-Ocean as its exclusive financial advisor to assess and formulate an optimal solution for its existing capital structure and liquidity challenges. A coordinating committee of bank lenders (the “CoCom”) representing approximately 50% of the company’s existing syndicated loan facilities and an ad hoc group of noteholders (the “AHG”) were formed shortly after Houlihan Lokey’s retention to spearhead negotiations on behalf of creditors.
Several months into the process, it became evident that negotiating a deal that met the demands of both the CoCom and the AHG was going to be very difficult, if not impossible, to achieve. As such, Houlihan Lokey worked closely with Sino-Ocean to formulate a creative restructuring plan and implementation path that did not require the consent of both creditor groups to effectuate. Ultimately, a deal was agreed with the CoCom that was designed to (i) right size Sino-Ocean’s capital structure, (ii) allow existing shareholders to retain a controlling equity stake in the company to enable Sino-Ocean to retain its SOE status, and (iii) provide creditors the opportunity to benefit from potential future upside from a conversion of debt to equity. The transaction was implemented via a U.K. RP and an inter-conditional scheme of arrangement in Hong Kong SAR. The restructuring plan was actively challenged by the AHG during the U.K. court process; however, the court was convinced by the merits of the company’s arguments and exercised its discretion to approve the company’s restructuring plan by cramming down and binding dissenting creditor classes to the plan. The U.K. RP and scheme of arrangement in Hong Kong SAR were both sanctioned in February 2025, and the restructuring became effective on March 27, 2025.
Creditors received the following consideration in exchange for their c. $6.3 billion in offshore debt claims:
- $2.2 billion in take-back debt (New Debt), with a weighted average maturity of 7.8 years; and
- Equity (via mandatory convertible bonds (MCBs)) and perpetual securities (Perps). The MCBs convert into c. 50% of the company’s common equity and monetary distributions on the Perps can be deferred in perpetuity.
Allocation of the restructuring consideration:
- Creditors were split into four classes (Class A: Loans, Class B: Unsecured Notes, Class C: Unsecured Notes, Class D: Subordinated Perps) based on their implied recovery rates under the relevant alternative if the restructuring plan failed, which in this case was a group-wide liquidation.
- Each creditor class received a portion of the New Debt based on the ratio of their implied liquidation recovery rates as compared to the other creditor classes. Remaining claims, after deducting New Debt, were converted into MCBs and/or Perps.
The Sino-Ocean transaction represents a landmark transaction in Asia as (i) it is the first Chinese property developer to implement its restructuring via a U.K. RP utilizing a cross-class cramdown; and (ii) it is the first U.K. RP under which existing shareholders retained more than 50% of the post restructured equity without providing new money.
The Sino-Ocean transaction showcased not only Houlihan Lokey’s unparalleled expertise in advising companies in large-scale debt restructurings with cross-border complexities but also demonstrated Houlihan Lokey’s creative structuring capabilities, global footprint, and ability to negotiate and implement complex transactions in the Asia-Pacific region.