A Quick Recap of the Restructuring Plan
In 2023, a restructuring plan (the “Scheme”) was proposed and subsequently approved for the defaulted CENSUN 7.000% 03Jul2020 Corp (SGD) bonds. These bonds have since been delisted from the SGX, and bondholders are entitled to receive their pro-rata share of the Scheme Consideration.
The restructuring has an effective period of five years, commencing on 31 August 2023. As such, the restructuring is currently in its third year, with approximately two years remaining until its scheduled completion.
The Scheme Consideration comprises several components, including Term Extension Interest, Interim Payment(s), Term Extension Repayment(s), Early Repayment(s), and the Final Payment.
Meanwhile, the Scheme Company itself primarily consists of three main assets:
- 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.
- Zhangzhou Land: This land may initially be pledged as collateral for bridging loan facilities which may be required for the Shandong Land referenced below. It could be disposed of only after August 2025.
- 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.
To summarise:
- 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 (Land has yet been sold as of today).
- 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 shares sales proceeds relative to relevant costs.
What will happen if the Restructuring Cannot Be Completed Within Five Years?
There is a possibility of extending the restructuring timeframe if the restructuring cannot be completed within the five-year period, for instance, if the Scheme Company is unable to realise the scheme assets, such as the land in time to repay the Scheme Creditors. However, any extension or amendment to the Scheme would be subject to the relevant approval requirements under the Scheme, including the requisite approval from the Scheme Creditors and, where required, the relevant court and regulatory authorities.
If the Scheme Creditors do not approve an extension or the proposed amendments, or if the relevant court does not sanction the amended Scheme, the company may face enforcement or insolvency proceedings, including potential winding-up or liquidation. In such circumstances, the scheme assets, including the land, may need to be realised through a more accelerated or forced-sale process, which could potentially result in lower recovery proceeds for creditors compared with an orderly sale over a longer period.
Update on the Third Scheme Year (31st Aug 2026)
· Trading in Century Sunshine’s shares remains suspended, as the company has not yet published its 2024 Annual Report. This has in turn delayed the publication of its 2025 Interim and Annual Reports, as well as its 2026 Interim Report. Management attributed the delays to several outstanding matters, including the liquidation process and ongoing legal disputes concerning certain land and assets.
· The trading suspension was set at 18 months (with Century Sunshine’s deadline falling on 30 September 2026), the Hong Kong Stock Exchange may cancel the company’s listing under Rule 6.01A(1) of the Listing Rules.
· The scheme company has continued to dispose of its REMT shares during the Scheme Year. However, trading activity in the Scheme Shares has declined significantly compared with the second Scheme Year, mainly due to the weak market price, which has generally remained below HK$0.10 per share.
· During the third Scheme Year, proceeds from the sale of Scheme Shares amounted to HK$838,936.68, which was insufficient to cover the Scheme Costs of HK$846,893.15. As a result, no distribution will be made to creditors for the third Scheme Year.
· Under the Scheme's payment waterfall, the unpaid Term Extension Interest for the third Scheme Year is carried forward and ranks ahead of any Term Extension Repayment, to be paid from future Scheme Shares and Zhangzhou Land proceeds after Scheme Costs and the current year's interest. However, recovery depends on future proceeds exceeding these prior claims, which remains uncertain given weak share prices and the stalled Shandong Land disposal.
What is the latest status of Shandong Land?
· As mentioned in our earlier article update, the LuoZhuang District Government issued a notice unilaterally terminating the relocation agreement, alleging that Shandong Hongri had failed to complete the required soil remediation. The remediation was treated as a prerequisite for the government to proceed with the land acquisition/land reserve and subsequent land-use conversion process.
· Shandong Hongri maintains that the LuoZhuang District Government did not provide clear written guidance on the required soil remediation procedures, standards or implementation requirements. In response to the termination, Shandong Hongri submitted a further administrative review application to the Linyi Municipal Government, seeking to have the termination notice revoked.
· Following the unilateral termination of the relocation agreement, the Luozhuang Court scheduled an online judicial auction of part of Shandong Hongri's land-use rights for 16 February 2026. Shandong Hongri subsequently applied for a stay of the auction and challenged the land valuation, arguing that the land should not be valued solely as industrial land given its potential conversion to a higher-value use under the relocation arrangement.
· At this juncture, the unilateral termination of the Relocation Plan remains under administrative review, which is currently suspended pending the determination of the Retrial Application. Separately, the judicial auction has not taken place and remains on hold.
· Overall, there has yet to be any material developments in relation to the Shandong Land since our earlier article update published this year.
Zhangzhou land
· The initial plan contemplated that the Zhangzhou Land could be pledged as security for a Bridge Loan in connection with the proposed disposal of the Shandong Land.
· Given that the land-use conversion process for the Shandong Land remains stalled, while the Zhangzhou Land may be disposed of after the second anniversary of the Scheme Effective Date, the Scheme Administrators are discussing with management whether it is still necessary to retain the Zhangzhou Land as security for the Bridge Loan.
Our view
· Considering that there are no other assets currently available for monetisation, any recovery or coupon payments are highly dependent on progress in the land-use conversion of the Shandong Land. Given the complexity of the process, we estimate that could take 3–5 years or even longer to complete.
· As of 2023, the Shandong Land was valued at approximately RMB 4 billion, compared with total outstanding Admitted Claims of around HK$1 billion. If the land is successfully disposed of at or around the valuation price, the proceeds should be sufficient to cover the outstanding borrowings. However, the actual recovery will ultimately depend on the realisation value.
· Overall, there have been no material updates. Century Sunshine’s share sales remain subdued, with the proceeds insufficient to cover the Scheme Costs. We will continue to keep bondholders informed should any material information or updates be provided by the Scheme Administrators or the company.
· As the company does not make frequent announcements, investors should expect the next update on the next scheme anniversary (31 August 2027).
