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Unit of Chinese developer RiseSun seeks U.S. recognition of debt swap

Reuters
Reuters
 2022-02-14
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(Reuters) - An unit of a Chinese real estate developer RiseSun Real Estate Development Co Ltd on Monday filed papers in a Manhattan bankruptcy court seeking legal protection in the U.S. as it pursues a debt restructuring in the British Virgin Islands.

The unit, RongXingDa Development (BVI) Ltd, owes $779.7 million in senior note debt. RiseSun primarily develops small-to-mid-sized residential properties in China. RongXingDa began exploring restructuring options after RiseSun struggled to pay down debts as a result of declining property sales in China and trouble accessing funding from capital markets, according to court papers.

The restructuring comes amid broader turmoil in the Chinese property development sector that has escalated in recent months with Evergrande Group’s debt crisis.

Foreign entities that undertake debt restructurings in their home jurisdictions can seek recognition of those transactions under Chapter 15 of the U.S. Bankruptcy Code. Recognition by a U.S. court allows them to enforce their home court’s orders against any efforts to pursue related litigation or collect on debts in the U.S.

RongXingDa, which is incorporated in the BVI, does not have any operations and was created solely to issue debt for its parent, according to court papers. It is currently seeking approval of a pre-arranged restructuring plan known as a "scheme of arrangement" in the Eastern Caribbean Supreme Court.

In Monday's filings, it asked for an order recognizing the BVI proceedings in the U.S. Bankruptcy Court for the Southern District of New York.

A lawyer for RongXingDa’s foreign representative did not immediately respond to a request for comment.

RongXingDa proposed a restructuring in January, when final payment on some of its debt was due.

The restructuring, which is being conducted under the BVI Business Companies Act, calls on the noteholders to exchange their existing holdings for new debt that would have to be paid off in 2023 and 2024 and a small amount of cash, as well as interest on the existing notes. Holders of more than 75% of the notes have agreed to support the deal.

An official noteholder vote on the restructuring is set to occur on Mar. 3. If the deal is approved, a hearing on the proposed restructuring will occur on Mar. 10 before the BVI court.

RiseSun had a total of 370 property development projects across 86 cities in China as of June 30, 2021, according to court papers.

The case is In re RongXingDa Development (BVI) Ltd, U.S. Bankruptcy Court for the Southern District of New York, No. 22-10175.

For RongXingDa's foreign representative: Anthony Grossi and Shafaq Hasan of Sidley Austin

Our Standards: The Thomson Reuters Trust Principles.

Maria Chutchian reports on corporate bankruptcies and restructurings. She can be reached at maria.chutchian@thomsonreuters.com.

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