By Clare Jim
HONG KONG (Reuters) – China's Sunac developer has informed some dollar lenders that it is unlikely to meet the September bond maturity deadline, two sources said, as weak sales raise the possibility of a new round of offshore debt in the property sector. Sunac, once among the country's top developers by sales, was the first to complete a comprehensive restructuring of its $9 billion offshore debt by November 2023, after the sector was hit by an unprecedented debt crisis in 2021. As part of the restructuring. Under the scheme, the company's first tranche of adjusted notes will mature in September, with an option to extend maturity by one year. The extension also applies to the dividend payable in September 2026. In recent weeks Sunac has indicated to some bondholders that it will explore alternatives to the September 2025 tranche maturity due to uncertainty in the recovery of the sector's market which could affect its ability to repay, the two sources said. he said. Beijing-based Sunac has yet to provide specific details of the option to its lenders, said the sources, who were familiar with the matter but declined to be identified as the discussions were confidential. Sunac declined to comment. The development adds to market expectations that the affected sector will see a second round of offshore debt restructuring with many betting on a corporate bailout in the near future without Beijing's support. Chinese authorities have sought to bolster the property sector, which accounted for about a quarter of the economy at its peak, with a series of measures that have included cutting mortgage rates and lower mortgage rates over the past year. As part of the debt restructuring process, Sunac in 2023 offered a financing option with a short tenure to dollar lenders because it did not expect a long-term market downturn, said three different people close to the company. However, investor confidence in the successful implementation of these plans remains limited, as shown by the company's September 2025 bonds now trading at around 14 cents on the dollar, a senior Morningstar analyst. Arvind (NS:) said Subramanian. “Until they see that the attraction of these developers is actually generating cash flow, they are not very sure that the restructuring will deliver the cash flow back to the investors,” said Subramanian. DEBT REHABILITATION In the case of Sunac, it is unclear whether it will extend the maturity of the September 2025 tranche or rethink all of its offshore debt, possibly involving a haircut and more swaps, in a second round of debt restructuring, the sources said. China's property developers had debts of about 12 trillion dollars by 2023, according to estimates by the National Bureau of Statistics of China. That number includes all types of debt, as well as onshore and offshore debt. Over the past three years, a growing number of developers have initiated offshore debt restructuring programs after defaulting on their payment obligations to avoid payment. On Monday, developer Logan Group said it was offering to restructure most of its roughly $8 billion of offshore debt, including a conversion to mandatory convertible bonds for overseas creditors. An offshore restructuring consultant, who asked not to be identified because of the seriousness of the issue, said many developers will struggle to pay off their offshore debt as they have to use their money to complete the home and pay off the offshore debt. Sunac is also the first Chinese property developer to reduce its $2.1 billion yuan-denominated bond issue by more than half through a debt restructuring program. Even as heavily indebted developers begin to refinance offshore bonds in 2022, they are repeatedly increasing the growth of offshore bonds, pinning their hopes on getting cash. Sunac's onshore bond renewal plan, proposed in November, has so far won enough support from eight bondholders, but requires approval from all 10 bondholders to implement the proposal.