Less than half a month apart, Risesun Development has carried out two "debt-for-asset settlement" transactions both domestically and overseas.

On November 2, Risesun Development released an announcement, changing the repayment method of two batches of US dollar-denominated bonds from cash repayment to asset swap.

The announcement shows that Risesun Development plans to appoint its overseas wholly-owned subsidiary Rongchangda Development (BVI) Limited as the issuer, to repurchase and cancel the US dollar bonds that are effectively tendered and accepted by holders through a Pure Exchange Offer, using cash plus the equity of overseas real estate projects.

The corresponding amount of debts to be resolved covers the bond principal equivalent to about RMB 3 billion, as well as the corresponding interest of RMB 299.46 million on this part of the principal. The announcement also sets two clear boundaries: no new bonds will be issued to replace old ones, and there is no threshold requiring consent from more than 75% of bondholders.

As of September 29, 2026, the outstanding principal of the two target bonds is about USD 845 million, and the accrued and unpaid interest is about USD 89 million. This time, roughly half of them will be processed.

Consideration Breakdown

The two bonds are Notes A and Notes B respectively, with outstanding principal of USD 231 million and USD 615 million, both carrying a coupon rate of 9.5%. They were originally due in 2023 and 2024 respectively, and were uniformly extended to March 29, 2028 after the consent solicitation in 2023.

The equivalent principal of RMB 3 billion planned to be resolved this time accounts for about half of the outstanding principal of USD 845 million. The other half will remain in accordance with the original terms, and the maturity date remains unchanged.

The consideration consists of two parts: the first is a fixed cash pool of RMB 35 million to RMB 36 million, which will be paid in US dollars and distributed pro rata among all accepted bonds based on the tendered amount; the second is to establish a unit trust in the British Virgin Islands (BVI), issuing a total of 10 million trust units, with the underlying assets being 100% equity of the Czech project company.

Roughly calculated based on the announcement, the creditor's rights side is RMB 3 billion of principal plus corresponding interest of RMB 299 million, totaling about RMB 3.3 billion; the consideration side is the upper limit of the cash pool of RMB 36 million, plus the assessed value of all shareholders' equity of the project company of RMB 182 million, totaling about RMB 218 million. Dividing the two, the book coverage ratio is about 6.6%. Every RMB 100 of creditor's rights corresponds to about RMB 6.6 of cash plus assets.

This figure requires three footnotes.

First, RMB 36 million is the upper limit of the cash pool. If the effective tender exceeds the amount the company intends to accept, the distribution will be reduced proportionally, and the actual allocation ratio for a single holder may be lower than the book value.

Second, RMB 182 million is the assessed value, not the realizable value. The benchmark date for assessment is June 30, 2026, and the asset-based approach is adopted. The asset-based approach calculates the revaluation of net assets on the balance sheet, which neither represents the price the market is willing to pay nor includes the time required for disposal.

Third, there is another sum of money not included in the RMB 218 million. The company promises to inject US dollar cash equivalent to RMB 15 million to RMB 16 million into the BVI holding company holding the project equity before the closing date, to pay the existing liabilities of the project company and the operating expenses of the trust, holding company and project company. The announcement clarifies that this sum of money will not be directly distributed to the exchanging holders.

Adding the two sums of cash together, the company actually needs to invest about RMB 50 million to RMB 52 million.

Why the Czech Project?

The underlying asset is 100% equity of a real estate project company located in Pasohlávky, South Moravian Region, Czech Republic, held by a subsidiary of Risesun Development.

The announcement describes the current status of the project as being in the pre-construction stage, generating no operating cash flow; the company and the issuer will no longer continue to develop the project, and the external disposal manager appointed by the trustee will be responsible for marketing and sale, which can sell the real estate, or sell the equity of the project company or the holding company.

An overseas project that generates no cash flow is put into a trust, divided into 10 million units, and distributed to bondholders who are willing to tender.

After the transaction is completed, the accepted bonds will be recovered and cancelled by the overseas clearing institution, offsetting the corresponding debts at the level of Risesun Development; after completing the necessary trust registration, the holders will become trust unit holders and obtain the equity of the project by virtue of their units.

The change in the relationship here is worth noting: holders have changed from creditors to beneficiaries of overseas projects. The former corresponds to the rigid obligation of principal and interest repayment, while the latter corresponds to the distribution after asset realization.

The announcement also shows that the trust assets will be realized and liquidated by the trustee and the manager entrusted by it, and the trust units do not constitute the issuer's rigid repayment obligation, whose value depends on the future realization of the project.

The project itself has defects, including development obligations under the 2019 land purchase agreement, pre-emption rights and repurchase rights of third parties and other right restrictions, the details of which are subject to the disclosure in the exchange offer memorandum and the assessment report.

For holders, two layers of uncertainties are superimposed: the asset has no cash flow at present, and the disposal depends on the external manager to find a buyer; before disposal, the development obligations and pre-emption rights need to be dealt with first.

What is the quality of the consideration? The answer is not in the assessed value of RMB 182 million, but in the price of the yet-to-appear sale agreement.

Shortly before that, Risesun Development was taking the same path domestically.

On October 19, Risesun Development announced that it planned to restructure four domestic bonds, with total issued principal of RMB 4 billion, outstanding principal balance of RMB 3.8516 billion, and interest of about RMB 1.2 billion. The method is to offset part of the principal with assets in kind and exempt the interest; the assets used for debt offset are parking spaces of the Langfang Huayucheng project, with a book value of RMB 47.0488 million and an assessed value of RMB 38.8983 million, with an assessed impairment of RMB 8.1505 million.

Overseas, cash plus trust units are used, while domestically, cash plus parking spaces are used. The two plans are less than a month apart, and their common point is that neither is dominated by cash, and both require creditors to cede part of their rights.

The company disclosed that in the first half of 2026, it completed the extension of RMB 459 million of financial debts, resolved RMB 155 million of principal, and resolved RMB 706 million of operating debts; since 2026, it has cumulatively resolved RMB 3.771 billion of financial debts and RMB 1.78 billion of operating debts.

The Third Choice

This is already the third disposal of the same batch of debts.

In December 2021, Risesun Development launched an exchange offer and consent solicitation for two batches of US dollar bonds maturing in 2022, with a total amount of USD 787.7 million, and the minimum acceptance amount was 85% of the outstanding principal.

In 2022, the new notes after replacement were issued, namely today's Notes A and Notes B, with a coupon rate of 9.5%.

In September 2023, the company launched another consent solicitation for these two bonds. The plan included extending the maturity date by 4.5 years, adding principal installment payment clauses, raising the coupon rate, and paying at least 1.0% of interest in cash every year. The extended maturity date is March 29, 2028.

In November 2026, the third round of action is no longer an extension, but a one-time repurchase and cancellation of half of them. The first two rounds used time to exchange for space, and this round uses assets to exchange for cancellation. The change of path itself indicates that the space that can be freed up by extension has been almost exhausted.

In terms of mechanism, this time there are also obvious differences. Overseas debt restructuring usually takes the participation of more than 75% of holders in the restructuring support agreement as the promotion condition, but this time there is no such threshold: effective tenders will be allocated proportionally within the scale that the company intends to accept, tenders exceeding the scale can be reduced proportionally, and if the tenders are insufficient, they will be accepted according to the actual effective tenders, and the bonds not exchanged will remain in accordance with the original terms.

The threshold is lowered, the plan can be promoted without waiting for the nod of the majority, but the result is no longer unilaterally determined by the company.

For holders, the fixed cash pool is a structure where more investment leads to more dilution: the total amount of the pool remains unchanged, the more creditor's rights participating in the tender, the less cash each unit of creditor's rights can get. This will directly affect the willingness to tender and the final tender ratio.

There is also an easily overlooked clause: the Exchange Claim Amount is based on the outstanding principal (including the PIK interest effectively capitalized in accordance with the indenture as of September 29, 2026) and the accrued and unpaid interest as of that date (excluding that date); the accrued and unpaid interest from September 29, 2026 to the completion of voting or the closing date will not be paid, and will be exempted by the participating exchanging holders.

Calculated based on the company's strive to close the transaction before December 31, 2026, the additional interest ceded by holders is nearly a quarter, which is not included in the aforementioned 6.6%.

The schedule is very tight. The company plans to launch the exchange offer documents, with the initial voting period of about 3 weeks, which can be extended if necessary, and strives to complete the closing of assets and liabilities before the end of the year.

In terms of procedures, the transaction has been reviewed and approved at the 29th meeting of the 8th board of directors, and still needs to be reviewed and approved by the shareholders' meeting, the effective tender and acceptance by overseas bondholders, and the completion of closing to take effect. The documents related to the exchange offer are still under preparation, and the specific arrangements have not been finally determined.

For Risesun Development, the boundary between what this step can solve and what it cannot solve is relatively clear.

What can be solved is the rigid repayment pressure of about half of the overseas debt principal, the debt is eliminated at the level of the listed company, the scale of interest-bearing liabilities is correspondingly reduced, and the maturity pressure in March 2028 is halved.

What cannot be solved is the other half: the remaining principal remains in accordance with the original terms, and the maturity date is still March 29, 2028; the value of the trust units depends on whether the Czech project with no cash flow and right restrictions can be sold, for how much, and when it will be sold.

What is more realistic is the consideration structure: this restructuring will cost more than RMB 50 million in cash, plus an overseas asset with an assessed value of RMB 182 million, in exchange for the cancellation of about RMB 3.3 billion of creditor's rights.

The announcement on November 2 is just the starting point. The plan can only be established after passing three checkpoints: approval by the shareholders' meeting, willingness of holders to tender, and completion of closing before the end of the year.

This article is from the WeChat official account "Viewpoint", Author: Viewpoint New Media, published with authorization from 36Kr.