RiseSun Real Estate unit’s Chapter 15 case closed by bankruptcy court

By Sarah Lizee

Olympia, Wash., May 25 – RongXingDa Development (BVI) Ltd., a special purpose vehicle owned by RiseSun Real Estate Development Co., Ltd.’s subsidiary, RiseSun Land Development (Hong Kong) Ltd., had its Chapter 15 case closed, according to an order filed Wednesday with the U.S. Bankruptcy Court for the Southern District of New York.

As previously reported, the company’s foreign representative, Liu Jingrui, had asked for the closure.

Jingrui said that with entry of the recognition order by the court, there is no longer a reason for the Chapter 15 case to remain open.

As previously reported, the SPV issued $500 million of 8% senior notes due April 24, 2022 (ISIN: XS1979285571) and $300 million of 8.95% senior notes due Jan. 18, 2022 (ISIN: XS2280638607). On Jan. 14, the coupon rate on all of the existing notes was increased to 9½%. As of Jan. 17, there was $779.7 million outstanding under the existing notes.

The proceeds were transferred to RiseSun by way of an intercompany loan. The debtor had no other significant assets other than the loan and no other significant liabilities other than the notes.

The company did not make payment of all amounts due and payable under the notes due in January upon the final maturity date.

Given that the debtor is a non-operating entity, the payment under the existing notes was intended to be paid by RiseSun through operating income, net profit, cash flow from operating activities and other financing sources of the company.

A decline in property sales and difficulty in obtaining funding from onshore and offshore capital markets, however, precipitated the need for alternative restructuring options.

“During the second half of 2021, Chinese property developers and the capital markets that funded the growth and development of the sector have experienced an inflection point,” the foreign representative said in earlier court documents.

“Reduced bank lending for real estate development has resulted in reduced access by property developers to PRC capital.

“In addition, reduced bank lending for buyers seeking mortgage financing, as well as buyers’ concerns about the ability of property developers to complete projects, has resulted in reduced property sales.”

Adverse reaction to these events by international capital markets has limited the company’s funding sources to address upcoming maturities, Jingrui said.

Prior to the Chapter 15 filing and foreign proceedings, commercial bills and wealth management products in China issued or guaranteed by RiseSun or its subsidiaries became due. RiseSun has been actively negotiating with creditors to resolve any issues regarding the payment maturities within a reasonable timeframe.

On Dec. 10, the debtor appointed Haitong International Securities Co. Ltd. as financial adviser and Sidley Austin as legal adviser to assist in debt restructuring negotiations with holders of the existing notes.

On Dec. 16, the debtor launched an exchange offer and consent solicitation for the notes to extend the debt maturity profile, strengthen the balance sheet and improve cash flow management. By the end of the exchange offer and consent bid, 75% of all existing notes were tendered for exchange. However, the debtor didn’t get enough support from holders to effect the exchange. As such, the debtor terminated the exchange and said it would seek to effect a restructuring of the existing notes through a scheme of arrangement.

Under the restructuring, creditors were to receive the following:

• A cash redemption equal to 5% of the outstanding principal amount of the existing notes held by each scheme creditor as of the record time;

• New 9½% notes due 2023 and 2024 in a total principal amount equal to 95% of the outstanding principal amount of the existing notes held by each scheme creditor as of the record time and, without double counting, any residual new notes; and

• Accrued interest on the existing notes up to but excluding the transaction effective date at a rate of 8.95% per year for the January notes and 8% per year for the April notes up to and including Jan. 13, and 9½% per year for each series thereafter, in cash.

The scheme also provides for releases of certain claims against the debtor, RiseSun and their affiliates.

RiseSun is a Langfang, China-based property developer. RongXingDa Development filed Chapter 15 bankruptcy on Feb. 14 under case number 22-10175.

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