Oriental Garden's debt restructuring creates another wave of rebirth.

Author | Cao Anxun

After the strategic cooperation with the state-owned enterprise CICC Guoce, Guo Ziwen, Chairman of China Aoyuan Group, has not made a public appearance for more than five months. Even on October 17th, the 27th anniversary of Aoyuan's establishment, Guo Ziwen only supervised the details of the building handover in the WeChat group at 7 o'clock in the morning, and expressed gratitude to the employees in the routine team lunch work meeting, without any large-scale public celebrations or activities.

Behind this is the fact that Guo Ziwen has been busy with debt restructuring and self-rescue actions this year. However, recently, there have been waves of turbulence on the eve of the overseas debt restructuring repayment agreement voting meeting of Aoyuan.

On November 19th, Wall Street News learned from informed sources that Ping An Overseas publicly opposed Aoyuan's overseas restructuring plan at a public hearing in the Hong Kong court, and it was the only creditor who publicly opposed at the hearing.

According to Aoyuan's overseas debt restructuring plan disclosed in July, the restructuring scale is about 5.9 billion US dollars. Aoyuan plans to issue new financing instruments to replace the original bonds, including 4 new debt instruments totaling 2.3 billion US dollars, 1.4 billion shares of common stock, 143 million US dollars of interest-free mandatory convertible bonds, and 1.6 billion US dollars of perpetual bonds.

Ping An Overseas' opposition was rejected by the judge on the same day, requiring them to provide more supporting documents. The subsequent actions of Ping An still remain to be seen.

Ping An Group did not respond to the reasons for Ping An Overseas' opposition.

Another creditor of China Aoyuan believes that as holders of high-yield bonds, Ping An and other creditors have a yield that is more than 1 times higher than other creditors. Now that Ping An opposes, they want to enjoy the same repayment rate as the secured creditors.

Ping An did not comment on this matter.

As an invisible "real estate big boss", Ping An has deeply laid out in the real estate industry through equity investments in the past few years, and has been the second largest shareholder of many leading real estate companies such as Country Garden, Jinmao, and Sunac. However, it has encountered difficulties since the deepening of real estate regulation.

Ping An's real estate investment and asset management platform, Ping An Real Estate, had its issuer rating downgraded to "Ba1" by Moody's in October. Moody's stated that "the long-term downturn in the Chinese residential real estate market will affect Ping An Real Estate's income and investment returns in the next 12 to 18 months."

Nowadays, Ping An is weakening its real estate investment and reducing the investment risks related to real estate. After the exposure of Country Garden's debt issue, Ping An cleared its holdings of Country Garden stocks within a month and a half.

As one of the largest Chinese insurance giants, China Ping An has a huge scale of real estate investment. This opposition to Aoyuan's debt restructuring plan may introduce variables to Aoyuan's overseas debt restructuring. If the debt restructuring plan cannot be approved, the result will be the liquidation of the company.

On one hand, Ping An Overseas is trying to fight for more interests for itself, and on the other hand, other creditors who want to quickly implement Aoyuan's overseas debt restructuring agreement and collectively go ashore. The differences between creditors, Ping An Overseas, and Aoyuan are becoming the biggest obstacles to Aoyuan's overseas debt restructuring.

One of Aoyuan's creditors, a director and general manager of a large investment fund, said that Aoyuan's domestic corporate bonds and bank loans have been extended, and agreeing to Aoyuan's overseas restructuring plan is more about whether Aoyuan can ensure normal operations domestically, giving each other "hope" and hoping that the company and the Chinese economy can stabilize and recover in the future. According to the announcement from Agile Group, the Grand Court of the Cayman Islands in the High Court of Hong Kong has ruled that a meeting for the arrangement of debt repayment for Agile Group's creditors will be held on November 28th.

At the meeting, if more than 50% of the creditors in attendance and over 75% of the total voting rights express their support, the restructuring agreement will be deemed successful. After being approved in the restructuring approval hearings on December 7/8, 2023, and January 8, 2024, in various courts, the execution can proceed.

Previously, in August, overseas creditors holding 75.89% of Agile Group's existing note principal amount had signed or agreed to support the restructuring agreement.

Since the beginning of this year, Agile Group's progress in debt restructuring and self-rescue has been relatively smooth. First, it introduced four state-owned "white knights" such as CICC National Investment and Shandong Health to revitalize old projects. Then, it completed the extension of billions of yuan in domestic debt, issued financial reports, and resumed trading of its stocks.

In terms of operations, from January to October, Agile Group has actually delivered over 23,000 housing units, and it is expected to deliver nearly 20,000 units by the end of this year. In the first half of the year, Agile Group achieved a total revenue of approximately 10.94 billion yuan, a year-on-year increase of 25.1%.

Agile Group's experience is also a microcosm of the real estate industry, especially private real estate enterprises. After more than two years of deep adjustment in the real estate market, the first batch of troubled real estate companies have gradually diverged in their fate.

Some companies, such as Evergrande, China Fortune Land Development, and Sunac, have completed domestic and overseas debt restructuring and focused on operations. Others, like Country Garden, Tahoe, and Xiangsheng, have gradually faded away from the real estate market.

Fortunately, after going through the darkest period of the industry, positive news keeps emerging. Following the epic rescue policies in first-tier cities, on November 17th, the People's Bank of China, the China Banking and Insurance Regulatory Commission, and the China Securities Regulatory Commission issued statements supporting real estate companies to raise equity financing through the capital market in a reasonable manner.

After the storm, the future of the real estate market will undoubtedly belong to stable and prudent real estate enterprises.