(Yicai) Jan. 14 -- Chinese real estate companies, including Country Garden Holdings, are proposing debt restructuring plans with worse-than-expected terms, asking creditors for significant concessions due to poor home sales and shrinking balance sheets, according to industry insiders.

The latest schemes propose that creditors forgive substantial portions of debt principal, because home sales and property firms' liquidity have not significantly improved over the past year, according to an insider from a company undergoing restructuring.

Foshan-based Country Garden, formerly China's largest property developer, recently proposed a plan to restructure its overseas debt, aiming to reduce its liabilities by up to USD11.6 billion. As of Dec. 31 last year, the firm's total overseas interest-bearing liabilities stood at USD16.4 billion.

Another industry giant, Sunac China Holdings, recently unveiled its second debt restructuring plan because its first scheme agreed upon in late 2023 was proven to be insufficient. The latest program asks creditors to forgive over 50 percent of the homebuilder's outstanding debt.

According to an insider at a property company in eastern China, home sales and asset disposals are crucial funding sources for distressed real estate companies to repay debts. However, sales among China's top 100 real estate companies fell by 30 percent last year, and builders in default performed even worse. This forced them to revise their debt restructuring schemes after failing to meet sales projections included in their initial 2023 restructuring plans.

Liu Shui, corporate research director at the China Index Academy, explained that multiple factors—including market conditions, policies, and companies' asset structures—indicate that troubled real estate companies struggle to revitalize existing assets and generate sufficient cash flow through operations to cover current debts. This necessitates asking creditors to accept lower payouts.

However, Liu believes that if companies can effectively cut their obligations, they will improve their balance sheets, helping them secure new financing to ensure the construction and delivery of existing projects. This, in turn, would enhance buyer confidence in these enterprises while boosting property sales.

Editors: Tang Shihua, Emmi Laine