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Restructuring Approved: Expert Evidence in $6 Billion Debt Restructuring of Chinese Real Estate Group

Sino-Ocean Group Holding Limited (“Sino-Ocean”), a Hong Kong listed holding company of a large property development group primarily operating in China, faced a number of market-wide challenges – in particular, the high-level of developer defaults since the 2021 debt crisis in China. As a result, Sino-Ocean required a $6 billion debt restructuring and were facing a winding-up petition in Hong Kong. With a parallel English Restructuring Plan and Hong Kong Scheme of Arrangement, Sino-Ocean looked to FTI Consulting to provide expert evidence.

Though the Restructuring Plan was approved by two of the four classes of creditors, it was challenged by one creditor, resulting in a contested sanction hearing. Expert evidence on Relevant Alternative outcomes was submitted by FTI Consulting’s experts in both the English Restructuring Plan and Hong Kong Scheme of Arrangement, with evidence on valuation also submitted in the English Restructuring Plan. Both the Restructuring Plan and Scheme of Arrangement were ultimately sanctioned, enabling the significant deleveraging of debt, allowing Sino-Ocean to continue to operate and for the winding-up application to be dismissed.

Our Impact

With in-depth, robust and detailed analysis, we were able to determine the Relevant Alternative outcome if the restructuring was not approved. This provided the basis of the allocation of creditor returns following approval of the restructuring.
This evidence was a key part of the court’s assessment of the ‘no-worse-off test’ and enabled the judge to approve the Restructuring Plan with cross-class cram-down.
The impact and importance of state ownership on valuation was highlighted in our evidence, which was highly relevant to the court’s assessment of the fairness of the Restructuring Plan.

Our Role

With an integrated cross-border team spanning London, Hong Kong and Shanghai, FTI Consulting assessed the Relevant Alternative scenario and analysed the resulting value for creditors, including the viability of the counter proposal.
By developing an entity priority model with hundreds of entities to track value flow in a complex group and debt structure of $6 billion of unsecured and $4 billion secured liabilities, we conducted an in-depth analysis to determine the Relevant Alternative and to estimate creditor outcomes post-restructuring sanction.
A key issue in the hearing was the impact on valuation of continuing state ownership. The court acknowledged and agreed with the FTI Consulting expert that a higher level of state ownership was critical to Sino-Ocean’s long-term success.