Billionaire Sun Hongbin’s Sunac Defaults On Dollar Bond Payments

Sunac China Holdings, the real estate developer headed by billionaire Sun Hongbin, said it had defaulted on interest payments for a $742 million offshore bond, and it’s also unlikely to make the payments on other notes coming due this year and next, according to a Thursday filing to the Hong Kong Stock Exchange.

By failing to fulfill its financial obligations and falling into default, Sunac is joining the likes of China Evergrande Group, Fantasia, Modern Land, Kaisa Group Holdings and others that have struggled for access to financing after Beijing cracked down on the real estate sector, which the government views as having excessive levels of debt and posing a threat to financial stability.

Meanwhile, the country’s latest Covid outbreak and related curbs are dealing a blow to economic growth and homebuyers’ confidence. Sunac said in the aforementioned filing that contracted sales for both March and April plunged 65% year-on-year, which “further exacerbated the current liquidity constraints of the group.”

As a result, Sunac could not make its payment of $29.5 million in interest for the 7.95% senior note due October 2023. The deadline for the coupon payment was initially on April 11, but Sunac had a 30-day grace period the expired on Wednesday.

The company said the failure to make the payment may lead creditors to demand immediate repayment of the principal amount and accrued interest, but it hasn’t received any such demands from bond holders yet. Sunac also has three other dollar bond coupons that were initially due in April and also have 30-day grace periods to make payments as well.

“Given the group’s current liquidity constraints, there is no assurance that the group will be able to meet its financial obligations when due or within the relevant grace periods,” the filing said.

Sunac warned that this may result in relevant creditors taking enforcement actions. It has appointed investment bank Houlihan Lokey as its financial advisor and law firm Sidley Austin as legal advisor. The company said it would seek to resolve the liquidity crisis by accelerating sales and payment collection, asset disposals, seeking debt extension, and introducing strategic investors.

Last year, Sun himself provided a $450 million interest-free loan to his company. The announcement came in tandem with Sunac issuing new shares and selling shares in its property management unit, which helped to raise $953 million in total. The billionaire, a U.S. citizen, has seen his wealth tumble more than 70% from 2021 to its current level of $2.5 billion. Sunac has halted trading in its shares since April 1, and said in late March that it couldn’t publish its annual report on time.