The plan marks the first time that a Chinese property developer is proposing a debt-to-equity swap and steep haircuts for onshore debt.
Sunac has 15.4 billion yuan ($2.2 billion) in outstanding onshore debt. Much of China's property development industry has been mired in a debt crisis since mid-2021 that has hobbled economic growth and resulted in many unfinished homes despite efforts by the government to stabilise the market.
Hong Kong-listed Sunac, once one of China's top developers, was the first in the sector to have completed a successful restructuring of its offshore debt since the present debt crisis began.
The company met with some major onshore creditors last week about the options it is planning to offer in a second round of debt restructuring, the source and a second person with knowledge of the matter said.
The details are expected to be finalised by the end of November but are subject to change, the first source added.
Both sources declined to be identified as the discussions with creditors were private. Sunac declined to comment.
The proposed debt-to-equity swap would allow mainland investors to receive returns via an offshore trust company. New notes would be convertible into some 300-400 million Hong Kong shares at HK$8-10 per share. Sunac's shares were trading at around HK$3 on Tuesday afternoon.
The other options proposed to mainland creditors are: redeeming some existing bonds at a discount, accepting repayment from the planned sale of one land parcel and replacing existing notes with notes with a 1% coupon and maturities as long as 9.5 years and which also stipulate that the first principal payment would start only in the fifth year.
Sunac first restructured its onshore bonds in late 2022 by extending coupon and principal payments. After several payments became due again, it started delaying payments in June.
Local media outlet Cailianshe first reported about the four options that Sunac is proposing to mainland creditors.
($1 = 7.1031 Chinese yuan)
