Author | Cao Anxun

Editor | Zhou Zhiyu

The former richest man in Fujian, the godfather of luxury homes in China, and a donor of the wandering national treasure “Silk Road Landscape Map”, various labels have woven into the turbulent and colorful life of Xu Rongmao, the founder of Shimao Group. Now, almost two years after his adventure, Xu Rongmao has ushered in a critical watershed in his career, adding more variables to the fate of this wealthy family.

Many days after announcing the overseas debt restructuring plan, China Construction Bank (Asia) Co., Ltd. filed a winding-up petition against Shimao with the Hong Kong Special Administrative Region High Court on April 5, involving an amount of approximately HK$1,579.5 billion. As soon as the news came out, Shimao's stock price fell 18.68% on the same day.

A winding-up petition increased the pressure on Shimao to save himself.

Wang Yuchen, director of Beijing Financial Litigation Law Firm, said that the liquidation petition may have a certain negative impact on business operations, reputation, and capital chain. In this tense and sensitive time, China Construction Bank (Asia) may make it more difficult to restructure Shimao's debt and require more time and resources to coordinate the interests of all parties.

Some investors said that dissatisfaction with overseas debt restructuring clauses may be one of the important reasons why China Construction Bank (Asia) is forced to come to the door.

At the end of March, Shimao announced an overseas debt restructuring plan, providing creditors with four options, including replacing them with 6-year short-term instruments, 9-year long-term instruments, forced convertible bonds, and a mixed combination of these three instruments. According to the announcement, as of the end of June 2023, Shimao Group's overseas interest-bearing debt was approximately US$14 billion.

Some investors believe that although short-term and long-term bonds do not consume large amounts of debt, they all have an upper limit on size. In the debt-for-share swap plan, the share conversion price was as high as HK$8.5 per share, but now the share price is less than 5% of the conversion price.

In response, Shimao stated that it will vigorously oppose the petition and continue to push forward overseas debt restructuring to maximize the value of its stakeholders. Shimao has always conducted bona fide restructuring discussions with its overseas creditors and promised to continue to actively communicate with overseas creditors on its overseas restructuring matters. Shimao encourages all overseas creditors to carefully consider and support the implementation of the restructuring plan.

In fact, as one of the first real estate companies to take risks, Shimao has been trying to save itself.

After delivering 912,000 homes in 2023, Shimao delivered 13,481 homes in the first quarter. As of March 4, more than 100 projects had resumed work, with an overall resumption rate of over 80%. Furthermore, as of February, Shimao has applied for the whitelist for 40 projects, and 16 have already been shortlisted.

In addition to striving to stick to the bottom line of “guarantee delivery,” Shimao is also speeding up the recovery of disposed of assets.

According to Wall Street News incomplete statistics, since the 2022 accident, Shimao, Xu Rongmao, and Xu Shitan's father and son have sold more than 20 billion yuan in assets, involving many places in Hong Kong, Shanghai, Guangzhou, Nanjing, Australia, and London. Among them, there is no shortage of babies under pressure, such as shares in the Hong Kong Victoria Harbour Exchange Project, Shanghai Moyue Hotel on the Bund, and Guangzhou Asian Games City project shares, which shows the determination of Xu's father and son to save themselves.

Shimao also predicted at the end of last year that during the 2023-2033 period, the company's net income is estimated to be about 4 billion yuan to 40 billion yuan per year, and the total cumulative unleveraged operating cash flow is estimated to be about 200 billion yuan to 250 billion yuan, mainly from two sources, from development projects and commercial operations.

What is even more rare is that, as the controlling shareholder and founder of Shimao, the Xu Rongmao family gave real money support.

According to Shimao's announcement, Xu Rongmao has provided a total principal loan of HK$7.802 billion to Shimao Group and its subsidiaries through his wholly-owned company. Xu Rongmao will exchange outstanding shareholders' loans with a principal amount of 600 million US dollars for new long-term notes, and replace the remaining loans with mandatory convertible bonds to take the lead in showing support for Shimao's restructuring plan.

Some investors said they saw Xu Rongmao's sincerity from this point.

In fact, it is not uncommon for insured housing companies to be liquidated in recent years. Before Shimao, there were also real estate companies such as Country Garden, Evergrande, and Longguang. China Construction Bank (Asia) has also filed numerous winding-up petitions against insured housing enterprises such as Dexin China, Dafabet Real Estate, and Zhongliang Holdings, which are one of the “Four Tigers of Zhejiang Housing Enterprises.”

However, the liquidation petition does not mean that the general trend of housing enterprises is over; differences in the sincerity and progress of housing enterprises to save themselves will determine their fate after that.

The most recent example is Dragon Light. With the approval rating for overseas debt restructuring over half, and after granting consent fees and additional guarantees for overseas assets, Long Guang obtained understanding from creditors. The Cayman Islands Supreme Court and the Hong Kong High Court issued an order in February to withdraw the liquidation petition against Longguang's two wholly-owned subsidiaries.

Therefore, next, Xu Rongmao's father and son urgently need to prove that they still have capital to go ashore and repay debts, and strengthen communication and coordination with creditors to obtain sufficient approval to pass the debt restructuring plan. This will be the only way for the creditors to withdraw the winding-up petition and get Shimao back on track.

After two or three years of turbulent real estate, the fortunes of the real estate bosses who went on an adventure at the same time as Xu Rongmao's father and son were either taken away for investigation or lying flat. There are also a few, such as Sun Hongbin, chairman of the board of directors of Sunac, who have completed debt restructuring and saved the country.

Xu Rongmao's father and son also want to become one of the latter. Now, under the impetus of creditors' voices, this drama of restructuring and self-help has gradually reached its climax.