Background on Century Sunshine default
In the previous article update, we highlighted that the Scheme Company itself mainly comprises three main assets:
1. Scheme Shares: The Scheme Company would receive 79,012,680 shares in Rare Earth Magnesium Technology Group Holding Limited (REMT) (HKEX:601). These shares will be gradually disposed of over time (up to 15,802,536 shares per Scheme Year) to fund the Term Extension Interest.
2. Zhangzhou Land: This land may initially be pledged as collateral for bridging loan facilities which may be required for the Shandong Land referenced below.
3. Shandong Land: It is proposed that the land use will be changed from industrial use to commercial use under the Shandong government’s Relocation Plan, and its land value is expected to appreciate after this change. Hence, this land will be disposed of only after this change in land use.
Most of the Scheme Company’s assets are in [2] and [3] above, but holders of the 2020 defaulted bonds should expect some time before these pieces of land can be sold to unlock their value. This is especially true for the Zhangzhou Land which may not be sold until after August 2025.
The Scheme Shares in [1] will primarily be used to pay the Term Extension Interest which is capped at 5% and paid yearly. However, it is important to highlight that no amount is guaranteed on a yearly basis, depending on the actual proceeds from selling the shares relative to relevant costs.
Updates on second Scheme Year
· Trading in Century Sunshine has been suspended since 1 April 2025 due to its failure to release the 2024 Annual Report within the required timeline, as certain matters remain pending (including the liquidation process and legal disputes over land and assets). Consequently, the 2025 Interim Report will also be delayed.
· If the company remains suspended for 18 months (CENSUN’s deadline: 30 September 2026), its listing status may be cancelled by the Hong Kong Stock Exchange under Rule 6.01A(1) of the Listing Rules
· The company has actively disposed REMT shares in the Scheme Year, however, the proceeds were insufficient to cover the Scheme Costs as the overall share price remained unsatisfactory and there are still outstanding Scheme Costs for Second Scheme Year. Hence, there will be no distribution.
Shandong Land
- On 12 February 2025, onshore secured creditor was granted an execution ruling to auction part of the land use rights of Shandong Land by Luozhuang Court. Shandong Hongri applied to challenge the execution ruling and to date no decisions have been made and land rights have not been auctioned.
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On 4 August 2025, Linyi Court ruled that the agreement of the Relocation Plan (i.e. acquisition of Shandong Land from Shandong Hongri) remains valid and Luozhuang Government should fulfil its obligations.
- However, Linyi Court reaffirmed that Shandong Hongri needs to complete soil pollution remediation before the Luozhuang Government can proceed with the acquisition into the government land reserve.
- Shandong Hongri appealed on the basis that the obligation of soil pollution remediation lies with Luozhuang Government. A hearing was held on 11 September 2025 and no judgement has been made as of the date of writing. Meanwhile, negotiation is taking place with Luozhuang and Linyi Government to progress the land use change and the soil pollution remediation.
Zhangzhou Land
- The Scheme Administrators have consulted with the management of the Company on whether the Zhangzhou Land should still be reserved for the Bridging Loan. Otherwise, the management should plan to dispose the Zhangzhou Land.
- The management of the company is currently discussing with various stakeholders the terms of the bridge loan and other alternative financing to support the change of land use.
- The management has also indicated that there are no other available assets to secure the bridge loan.
- Scheme Administrators are of the view that the Zhangzhou Land should continue to be reserved for the purpose of the bridging loan, subject to further progress in respect of the disposal of the Shandong Land.
Our view
- Investors should be aware of the delisting risk, as Century Sunshine failed to release its 2024 Annual Report within the prescribed timeline. Its listing status may be cancelled if the suspension continues until 30 September 2026.
- Recovery or coupon payments are highly dependent on the progress of the land title change for Shandong Land, the whole process could take 3–5 years or even longer.
- As the company does not make frequent announcements, investors should expect the next update on the next scheme anniversary (31 August 2026).
- We will continue to keep investors informed should any material information or updates be provided by the Scheme Administrators or the company.
