Sidley represented Sino-Ocean Group Holding Limited (Sino-Ocean) in its restructuring of approximately US$6 billion in offshore debt. Sino-Ocean together with its subsidiaries (the Group) is principally engaged in property development in the People’s Republic of China (PRC) and had been affected heavily by the ongoing PRC real estate crisis.
Sino-Ocean’s restructuring became effective on March 27, 2025, becoming the first restructuring of a Chinese property group to be implemented via an English Restructuring Plan (RP). The extraordinary success of Sino-Ocean’s restructuring once again demonstrates both Sidley’s unmatched expertise in advising Chinese real estate companies in large-scale offshore debt restructurings and our team’s ability to manage and deliver complex restructuring transactions.
Sino-Ocean’s restructuring was implemented using a Part 26A RP in the United Kingdom and an interconditional and partially overlapping scheme of arrangement (Scheme) in Hong Kong. The RP was sanctioned on February 4, 2025 despite challenges on numerous grounds by certain minority creditors. The Scheme was sanctioned on February 19, 2025.
The Scheme was proposed by Sino-Ocean Land (Hong Kong) Limited, a subsidiary of Sino-Ocean, to a single class of lenders and was approved with a unanimous vote in favor and 86.2% turnout. By contrast, the RP was proposed by Sino-Ocean to four classes of creditors but was approved by only two of the four classes. Sino-Ocean relied on the English court’s exercise of cross-class cramdown powers to sanction the RP despite the two dissenting classes. The breakdown of voting on the RP was as follows:
- Class A plan creditors (being the same class of lenders to which the Scheme was proposed): 100% vote in favor, 86.2% turnout
- Class B plan creditors: 47.7% vote in favor, 73.9% turnout
- Class C plan creditors: 81.5% vote in favor, 84.5% turnout
- Class D plan creditors: 34.9% vote in favor, 61.9% turnout
Under the terms of the restructuring, creditors’ existing claims against the Group were released in exchange for a pro rata share in a fixed allocation of new debt instruments (in the form of new notes or a new loan), with the remaining amounts of creditors’ claims exchanged into a combination of new mortgage-backed securities and/or new perpetual securities.
Sino-Ocean’s restructuring was novel in several respects:
- This was the first RP in which one of the cramming classes comprised only foreign law debt (in this case, debt governed by Hong Kong law), in circumstances where a parallel process was being run in the relevant foreign jurisdiction (namely the Scheme).
- This was also the first RP in which a class of creditors “crammed down” (or “crammed across”) another class of creditors where the two classes would have ranked pari passu in the relevant alternative scenario, namely a liquidation of Sino-Ocean.
- This was the first RP where existing shareholders of the company were allowed to retain a substantial proportion of the equity in the restructured company, where the justification for such retention of equity was that it was in the interest of creditors to retain certain institutional shareholders, thereby ensuring that Sino-Ocean would retain its status as a state-owned enterprise.
The multidisciplinary Sidley team was led by partners Christopher Cheng (China Corporate and Finance), Kieran Sharma (Restructuring), Carrie Li (Capital Markets), and Desmond Ang (Dispute Resolution). The transaction involved a cross-border team working across several practice areas and offices, including the following:
- Restructuring (London): partner Kieran Sharma, lead managing associate Tom Burke, and associates Hannah Murray and Jasper Millard.
- Restructuring (Hong Kong): partner Dhevine Chandrapala.
- China Corporate and Finance (Hong Kong): partners Christopher Cheng and Olivia Ngan, senior managing associates Selina Wong and Dora Pan, managing associate Sammi Lee, and associate Kenny Wong.
- Capital Markets (Hong Kong and Beijing): partner Carrie Li, counsel Leonard Lou, registered foreign lawyers Jacob Zhao, Scarlet Feng, and Peter Liu, and senior legal assistant Kristine Zhang.
- Litigation (London): partners Sarah Lainchbury and Matthew Shankland and associate Daniel Wagner.
- Litigation (Hong Kong): partner Desmond Ang, senior managing associate Dennis Wu, and managing associate Edwin Leung.
