Sidley represented RiseSun Real Estate Development Co., Limited (SZ: 002146) (RiseSun) and its subsidiaries in the restructuring of the group’s offshore dollar-denominated notes.
RiseSun is a leading real estate developer in the People’s Republic of China, with a focus on developing quality residential properties. The restructuring became effective on March 17. 2022 and is the first Chinese real estate company to complete an offshore restructuring of its indebtedness since 2016.
To start the restructuring process, RiseSun initially launched an Exchange Offer and Consent Solicitation (EOCS), pursuant to which participating noteholders were required to execute a Creditor Support Agreement (CSA). The EOCS stated that, in the event it was not consummated, a restructuring may be implemented by way of scheme of arrangement in accordance with the terms of the CSA. As the support levels surpassed the consent threshold required to implement a scheme of arrangement, RiseSun decided to implement the restructuring through a scheme of arrangement, instead of the EOCS, to achieve a holistic solution.
The complex transaction was therefore implemented through a scheme of arrangement in the British Virgin Islands (BVI) and through a parallel recognition proceeding under Chapter 15 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of New York. The scheme was implemented in a very short timeframe, having only taken a total of 60 days from the launch of the scheme to its sanction. It also achieved the highest supporting rate (98.15%) of recent comparable offshore schemes notwithstanding a very diversified investor base.
Through the restructuring, the existing New York law-governed notes (c. US$780 million in principal and accrued interest) issued by RiseSun’s subsidiary, RongXingDa Development (BVI) Limited, were exchanged for a cash payment and the issuance of new notes with extended maturities. The new notes are also governed by New York law and are listed on the Singapore Exchange.
RiseSun’s restructuring sets the stage for the highly anticipated wave of Chinese real estate companies seeking large-scale debt restructuring of offshore liabilities in the upcoming months. The adverse impact of a number of factors on the Chinese real estate market has left many companies in the sector looking to restructure upcoming maturities under high yield notes in innovative and efficient ways. We expect to see many more restructurings in the sector and for these to follow a similar implementation model to that adopted on RiseSun’s restructuring.
The multidisciplinary Sidley team was led by partners Renee Xiong (Capital Markets), Jifree Cader (Restructuring), and Anthony Grossi (Restructuring). The transaction involved a team working together across several practice areas and offices including:
- Restructuring (London and Hong Kong): partners Mark Knight and Gordon Davidson, lead managing associate Raveena Channa, associates Molly Dyas, Luke Mason. and Harry York and trainees Henry Sasse and Victor Pianowski;
- Restructuring (U.S.): managing associate Michael Sabino, and associates Ryan Fink and Suzanne Span; and
- Capital Markets (Hong Kong): counsel Julia Zhu; managing associate Gordon Cheng; associate Angie Fan; senior legal assistant Joanna Yan.