Chinese developer Logan’s US$8 billion restructuring hinges on Hong Kong luxury tower loan

Chinese developer Logan Group is entering a crucial stage in its US$8 billion offshore restructuring, with just three months to pay or refinance a loan or risk losing control of a key luxury home project.

Holders of private debt issued by Logan – which has more than 150 projects across Chinese cities – have grown particularly concerned about this risk and expressed that to the firm, people familiar with the matter said. They have not even received any so-called restructuring support agreement from Logan, meaning they do not have finalised terms to assess, according to two of the people.

The clock is ticking. The loan in question is a HK$10.2 billion (US$1.3 billion) syndicated facility that matures in August backing The Corniche development on the south side of Hong Kong. Logan has engaged JPMorgan Chase to arrange a refinancing, but a deal has yet to be finalised, according to people familiar with the matter.

The case underscores the challenges of China’s real estate restructurings, even as recent policy steps to support the industry lift some borrowers out of distress. Valuable assets offshore are scarce, and stakeholders are in an increasingly fierce fight to grab their own share. Even for a largely settled plan like Logan’s which took almost two years to negotiate, a small moving piece risks affecting the whole deal.

Media representatives for Logan and JPMorgan declined to comment.

The project, co-developed by Logan and KWG Group Holdings, has been at the centre of Logan’s restructuring because of its potential to generate cash. Logan said in January that it planned to use revenue from sales of flats in The Corniche to help pay back creditors. But amid competition in Hong Kong’s property market, prices of some units have been reduced by more than 40 per cent from original asking prices.

If Logan and KWG fail to pay the loan at maturity or cannot refinance, creditors could seize the project, and the developers would lose control of the funds they intended to use to pay creditors, jeopardising the restructuring plan.

KWG did not reply to an emailed request for comment, and calls to the company went unanswered.

JPMorgan has held discussions about the refinancing in recent weeks with some potential lenders including private credit investors, the people said. One of the potential investors said that JPMorgan told it in recent days that the deal is oversubscribed.

Logan has said that its broad offshore restructuring would proceed by way of a so-called scheme of arrangement “and/or” through a bilateral agreement. Schemes of arrangement usually require 75 per cent consent from each creditor class.

Logan already has support from more than 90 per cent of public bondholders for its restructuring plan. But it would also need sufficient backing – it has not said publicly what level is needed – from the holders of the private debt, which includes equity-linked securities as well as certain bank loans.

The builder had said in January that it aimed to sign support agreements with all credit groups by the end of April.

Separately, alternative investment manager Ares Management sent a proposal to some banks to buy out a majority stake from them in the original loan backing The Corniche, Bloomberg News reported in April.

Ares has begun talks with lenders, according to another person familiar with the matter. Several banks that are willing to sell are already in the process of seeking internal approval, the person said.

“We are open-minded about working with the borrowers to restructure the loan on terms that can be mutually agreed,” a spokesperson at Ares told Bloomberg News on Tuesday when asked about the deal progress.

The many moving parts illustrate the complexity of such an offshore restructuring, where access to assets in mainland China is fraught. About 76 per cent of Logan’s land reserves are based in the affluent Greater Bay Area around Guangdong province and Hong Kong as well as the Yangtze River Delta region, according to its latest annual report.

The offshore debt plan involves US$3.4 billion of publicly issued dollar bonds, US$3.3 billion in private debt and a separate US$1.3 billion shareholder loan. The Corniche loan is not included in the restructuring.

Onshore debt has also posed challenges. In recent days, Logan delayed a voting deadline from May 27 to June 3 on its proposal to suspend repayment on some of its yuan bonds.

Logan’s dollar bonds have been falling in contrast to gains in some other property securities after recent policy-support measures. Its 4.7 per cent notes due in 2026 dropped under 9 cents on the dollar this week from above 10 cents in early April.

Logan has faced previous setbacks in its restructuring saga.

When a key group of bondholders decided to withdraw a liquidation petition in January, some bank lenders threatened to dissolve two key units of the company with their own petition. In the end, Logan got more breathing room when a Hong Kong court batted down the petitions.