(Yicai) June 28 -- Shares in Sino-Ocean Group plunged as much as 18 percent today after the beleaguered Chinese real estate developer, which first defaulted on its debt in August last year, was served with a winding-up order by US lender Bank of New York Mellon, which could lead to the compulsory liquidation of the company.

Sino-Ocean’s share price [HKG:3377] closed down 10.6 percent at HKD0.33 (USD0.04) today. Earlier in the day it plummeted to HKD0.30.

The Bank of New York Mellon’s London branch filed a winding-up petition against Sino-Ocean at the Hong Kong High Court yesterday involving a USD400 million note that is due to mature in 2026 together with accrued interest, the Beijing-based developer said in a filing to the Hong Kong bourse today. The note, which was issued by a subsidiary, is guaranteed by its parent firm.

Sino-Ocean will take legal action to resolutely oppose the petition, it said. The Hong Kong High Court has yet to issue a liquidation order.

The winding-up petition is not expected to have a substantial impact on the firm’s operations as its overseas debt restructuring is making significant progress, Sino-Ocean said.

Debt restructuring discussions between Sino-Ocean and the Syndicated Loan Coordination Committee have entered an advanced stage and they are expecting to reach an agreement on the main terms of the overall debt arrangement in due course, it added.

A number of Chinese developers have been served winding-up petitions by creditors as they restructure their debt following a default. It is not uncommon for creditors to file a liquidation petition to put pressure on these real estate firms to coerce debt solutions that are beneficial to them.

But these winding-up petitions are often rejected by the courts or they are settled out of court, especially when the developers have made good headway with their overseas debt restructuring, the person said.

Sino-Ocean defaulted on its debt in August last year when it failed to pay interest of USD20.9 million on an overseas bond on time. The developer suspended the payment of all its overshore debts in September 2023 to carry out a thorough restructuring of its overseas debts. In January the firm successfully rolled over CNY18.3 billion (USD2.5 billion) of onshore debt.

However the real estate market remains sluggish and developers in the midst of debt restructuring will still have problems with repaying debts and will probably need to extend their loan deadlines again.

Sino-Ocean is in a cash crunch resulting from a prolonged downturn in the Chinese real estate market. It had amassed debts of CNY96.1 billion (USD13.3 billion) as of the end of last year, with CNY69.8 billion due this year, and CNY11 billion in the next two years.

The company’s liabilities were CNY8.5 billion (USD1.1 billion) more that its assets and it had just CNY2 billion of cash and cash equivalents.

Editors: Tang Shihua, Kim Taylor