A Chinese science park developer has been threatened by creditors with legal action over its plan to restructure almost $1bn of debt, in an example of the liquidity crisis spreading to another segment of China’s property sector.
A group of bondholders plans to block the proposal from Tuspark, founded by the investment arm of Tsinghua University, one of China’s most prestigious educational institutions.
Tuspark has missed the expiry of grace periods on principal and interest payments on two offshore bonds, with the principal worth a total of $902.5mn. Funds managed by Credit Suisse hold the largest reported stake in both of the bonds, according to Bloomberg data.
Tuspark’s troubles underline the severity of the liquidity crunch rippling through China’s property development sector, which once attracted hundreds of billions of dollars of international funding but has since buckled under a wave of defaults.
The company says it runs the world’s biggest network of science parks in more than 80 cities worldwide, including two in the UK.
It ran into trouble last year, when it delayed maturities on the two bonds until May 2024, citing a shortage of cash and the Covid-19 pandemic. In its proposal issued last week, it blamed its failure to make payments on the fallout from the collapse of China’s property sector.
“Property developers and the capital markets that have funded growth and development of the property sector have experienced serious turmoil,” the company said. “The parent guarantor has been facing tremendous difficulty . . . in disposing its properties and assets . . . at a reasonable price or at all.”
Investors are pricing in almost $130bn in losses on Chinese property developers’ dollar debt, according to an FT analysis. Holders of bonds issued by the country’s heavily-indebted property groups such as Evergrande have issued legal threats and seized assets to recover their debts.
“The market for commercial property does not appear to be insulated from the broader slowdown in the economy, nor from the sudden illiquidity in the residential housing market,” said Logan Wright, a Hong Kong-based director at consultancy Rhodium Group.
The Tuspark bondholders’ group said through its law firm Kobre & Kim that the restructuring proposal offered “no real credit enhancement” or assurances that the group would make the proposed payments.
The group said it collectively held more than 25 per cent of the principal of the bonds required to block any proposal and had issued proxies to custodians to vote against the company’s proposal at a meeting on September 14.
It added that it was “prepared to take legal action” if Tuspark did not respond to a request for a meeting with the group by close of business on Wednesday.
Tus-Holdings president Cai Xiaowei told Bloomberg on Monday that the group would not be able to improve on its current restructuring offer and that the votes it had so far seen rejecting the proposal amounted to only 2 per cent of the total principal of the bonds.
Tuspark, Tus-Holdings and Credit Suisse did not immediately respond to requests for comment.
Additional reporting by Tabby Kinder in Hong Kong
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