Cover: Developers Impose Deeper ‘Haircuts’ on Creditors in Latest Debt Overhauls (AI Translation)

【周刊提前读】深度：房企重组高峰压境 重整削债博弈重重

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China's real estate firms and creditors have adopted a markedly different mindset in 2025, as the industry faces significant debt risks. Over 100 major developers, accounting for nearly 30 trillion yuan in domestic and foreign bonds and much larger total debt loads, have encountered escalating defaults since 2021. Half of the top 100 developers by sales have suffered debt crises, particularly private firms. While some attempted debt extensions and partial restructurings, few have achieved recovery, and creditors—especially private bondholders—are increasingly assertive. Achieving a second restructuring is now proving extremely difficult for troubled developers. [para. 1]

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Notable examples include CIFI Holdings and Logan Group, both previously seen as industry standouts, currently struggling to secure approval from creditors for domestic bond restructuring proposals—often necessitating repeated voting and plan adjustments. Sunac China, a leading firm, successfully passed a major onshore bond restructuring plan in January 2025, involving over 15.4 billion yuan of debt, with more than 50% haircuts. Sunac remains the only one of three major developers—alongside CIFI and Logan—to have obtained broad creditor support for a comprehensive restructuring. [para. 2][para. 3]

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Debt restructuring in China is formally defined by the 2019 revision of accounting standards, allowing new terms on repayment timing and amount between creditors and debtors. While restructuring began in 2021, domestic solutions mostly involved extending maturities with lower interest—usually not writing down principal—in hopes that a property market rebound would enable eventual repayment. However, with ongoing market weakness, principal reductions have become unavoidable. According to Guosheng Securities, 168 listed developers recorded combined revenues of 4.33 trillion yuan but suffered net losses exceeding 374 billion yuan in 2024, highlighting pervasive profitability pressures. [para. 4][para. 5][para. 6][para. 7]

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The Sunac template is now a benchmark for other troubled developers assessing creditor expectations and plan designs. Many developers, having abandoned hopes of sales-driven recovery, are opting for larger, package-style restructurings, with increasingly steep haircuts. Leading firms like Country Garden, Sino-Ocean, R&F, Times China, and others are also formulating comprehensive bond restructuring plans. Fitch and other industry analysts project that 2025 will be the peak year for onshore restructurings, increasingly mirroring offshore deals and focusing on mechanisms such as asset swaps, cash buybacks, and long-maturity rollovers. A key point of contention is the actual value and liquidity of assets offered in debt-for-asset swaps, often undermined by discounting, poor transparency, and market doubts. [para. 8][para. 9][para. 10][para. 11][para. 12]

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The current crisis is rooted in years of "high leverage, high turnover, high debt" business models under rising property prices and easy credit—now disrupted by tighter regulation, stricter escrow of presale proceeds, and declining refinancing options. Outflows have dried up; many firms can’t support basic operations, let alone service their debts, without drastic write-downs. Examples from Sunac's and others' restructuring plans show a multi-option approach—offering creditors choices among discounted cash, debt-for-equity swaps, asset swaps, or long-term extensions—but usually with substantial principal reductions (Sunac's plan involved a potential 69–80% haircut). [para. 13][para. 14][para. 15][para. 16][para. 17][para. 18][para. 19]

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Creditor trust has been eroded by previous overestimation of collateral value, weak legal protections for equity or income rights, and frequent "asset hollowing" where pledged project assets end up deeply encumbered or failing to cover claims. Notorious cases like CIFI’s Chongqing project and R&F Properties have revealed that the actual recovery for unsecured or subordinated domestic creditors can be close to zero. In practice, asset valuation and recovery rates are much lower than developers’ initial promises, fueling continued friction. [para. 20][para. 21][para. 22][para. 23][para. 24][para. 25]

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Creditors and observers now warn that many current asset-for-debt arrangements are little more than one-off maneuvers, not offering genuine recovery prospects unless asset value, saleability, and flow of proceeds are strictly supervised—conditions seldom met in current restructuring architectures. Calls are growing for third-party oversight and more creditor say in asset realization, amid widespread distrust in developer-dominated trust structures managing the "settlement assets." [para. 26][para. 27][para. 28][para. 29][para. 30]

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With over 525 billion yuan of real estate bonds maturing in 2025, should the property market continue to stagnate, even restructured firms are at risk of second defaults. Some, such as Jinke Group, have begun formal bankruptcy restructuring, splitting assets and using equity conversion to attract new investors. Yet, with many developers’ operational value collapsing as projects are completed and sold, restructuring yields only temporary relief—not true recovery. Industry experts advocate future models focusing on asset-light businesses, operations, and REITs to build sustainable earnings and access new financing. [para. 31][para. 32][para. 33][para. 34][para. 35][para. 36][para. 37][para. 38]