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Shares of the struggling Chinese real estate company experienced a notable rally today after announcing a return to profitability last year, primarily driven by a CNY40 billion (approximately USD5.8 billion) income from its debt restructuring efforts.
The company’s stock closed at HKD 7.6 cents (about USD 0.0097), marking a 5.7% increase, having reached a peak gain of nearly 14% during trading hours. Its current market value stands at approximately HKD 1.4 billion (around USD 178.7 million), which is still roughly 70% lower than the valuation at the same time last year.
After enduring losses for three consecutive years, the company estimates that it achieved a net profit of between CNY 17 billion and CNY 19 billion (roughly USD 2.5 billion to USD 2.8 billion) in the previous year. This turnaround is largely attributed to a one-time gain from completing an overseas debt restructuring at year’s end, according to its earnings forecast released yesterday.
Historically, the developer reported net losses of CNY 13 billion, CNY 9 billion, and CNY 7.1 billion from 2022 through 2024. Without accounting for the one-off gain, it still experienced a net loss last year, estimated between CNY 7.5 billion and CNY 9 billion, mainly due to reduced revenue from fewer completed projects and declining gross margins amid the downturn in the market.
In late December, the company confirmed that its overseas debt restructuring had been successfully executed. Coupled with the domestic debt restructuring plan approved by creditors in September, the entire three-year restructuring process was finally completed.
The firm revealed that the total debt involved in the restructuring, including both domestic and international obligations, was around CNY 66.8 billion (USD 9.7 billion). Of the overseas debt of CNY 56.7 billion, CNY 38 billion was reduced through debt-to-equity swaps and principal write-offs. Domestic debts totaling CNY 10.1 billion were also reduced by over CNY 5 billion.
With these restructuring efforts finalized, the company anticipates its total interest-bearing liabilities will decrease from approximately CNY 84.2 billion as of mid-2022 to around CNY 50 billion. This reduction is expected to bring interest obligations and net debt levels back to the figures seen in 2017.
Since 2022, Chinese real estate firms have been speeding up efforts to recover from financial hardships. Major players like Sunac China Holdings and Country Garden Holdings have also recently announced the completion of their domestic and overseas debt restructuring plans.
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