Recently, troubled real estate companies have made significant breakthroughs in debt restructuring. On October 16, CIFI HOLD GP (00884) announced the details of its overseas debt restructuring plan and the related measures it will take, including issuing mandatory convertible bonds (MCB), major shareholder debt-to-equity swaps, and a long-term equity incentive plan for its team. These plans will be put to a special shareholders' meeting for approval on October 31. Two days earlier, on October 14, Sunac announced an update on its second round of overseas restructuring, claiming that 94.5% of creditors had agreed to the plan, which is scheduled for a hearing in the Hong Kong High Court on November 5. Earlier, on September 24, Kimco revealed that it had signed a trust contract for bankruptcy reorganization special services with CITIC Trust Co., marking the legal structuring of its critical debt repayment mechanism, with reorganization entering a substantive operational phase.

A horizontal comparison of the restructuring plans of these three companies shows that debt-to-equity swaps are a common and significant approach to debt resolution. All three companies are utilizing new stock issuance to implement these swaps, which can increase their equity capital while resolving debts. Additionally, all plans include clauses to ensure major shareholders maintain control over the companies, thereby aligning the long-term interests of shareholders and creditors.

The recovery rate from debt-to-equity swaps fundamentally hinges on stock prices. Kimco's bankruptcy reorganization plan consists of three parts: the cash repayment cap for small debts is set at 50,000, a conversion of 2.53 shares for every 100 yuan of debt, and a conversion of trust income rights worth 0.019 yuan per unit for every 100 yuan of debt. For the recovery rate, Kimco provides a clear calculation logic: (cash repayment amount + number of shares obtained from debt-to-equity swap × stock price + number of trust rights × asset value per unit) ÷ total amount of general debts. Using this calculation, for a debtor with a significant amount of debt, the most substantial influence on the recovery rate comes from fluctuations in Kimco's share price. For example, with a debt amount of 10 million and assuming a stock price of 1.38 yuan per share, recovery would total approximately 586,400, corresponding to a recovery rate of less than 6%. If Kimco's stock price increases to the financial advisor’s estimated 6.46 yuan per share (a 4.7-fold increase), recovery could reach approximately 1,865,000, yielding a recovery rate exceeding 18%.

Considering that Sunac and CIFI HOLD GP have not provided clear calculations of their recovery rates, we can utilize Kimco's calculation method for reference. Sunac's plan involves converting 75% of its debt at 6.8 HKD per share and 25% at 3.85 HKD per share. After accounting for a 23% share dilution under the “Equity Structure Stabilization Plan” granted to major shareholders, a 10 million HKD debt could convert into approximately 1.35 million shares. With the current price of 1.52 HKD, recovery could approximate 2.052 million HKD, resulting in a recovery rate of about 20%; if Sunac's share price were to rise by 4.7 times, the creditors' recovery rate could exceed 80%.

CIFI HOLD GP's proposal includes a total of 40 million USD in top cash, 4.1 billion USD in convertible bonds (with a conversion price of 1.6 HKD per share), and 2.6 billion USD in retained debt. If all creditors opt for a full conversion, a 10 million HKD debt (after a 10% reduction) could convert to 562,500 shares. Based on CIFI HOLD GP's current share price of 0.22 HKD, recovery could total approximately 1.238 million HKD, yielding a recovery rate exceeding 13%; if CIFI HOLD GP's share price were to rise by 4.7 times, the recovery rate for creditors might reach over 60%.

Notably, CIFI HOLD GP is currently not included in the Hong Kong Stock Connect and has a market cap significantly lower than Sunac (Price-to-Book Ratio: CIFI HOLD GP 0.26, Sunac 0.69). The substantial increase in share capital post-restructuring could enhance CIFI HOLD GP's market capitalization and liquidity, potentially allowing it to return to the Hong Kong Stock Connect and providing higher upside potential compared to Sunac. Hence, the future performance of these companies' stock prices will greatly impact creditor recovery rates. Sustainable operations and a gradual recovery of profits and capital market valuations will be crucial for maximizing creditor benefits.

Mechanisms ensuring major shareholder control align their interests with those of creditors. A horizontal comparison shows all three companies' plans maintain the controlling position of the actual controller or the primary shareholder post-restructuring. The future earnings of the controlling party are closely tied to the company’s stock price growth, incentivizing them to focus on company operations and profitability recovery, ensuring alignment of interests between the acting controller/restructuring investor, creditors, and minority shareholders.

Kimco's restructuring investors include both strategic and financial investors, the former subscribing to 1.2 billion new shares at 0.63 yuan per share, while the latter subscribed to 1.8 billion new shares at 1.04 yuan per share. The total investment from restructuring investors amounts to 2.628 billion yuan, granting them nearly 30% of the post-restructured Kimco’s shares and 7 out of 9 board seats, resulting in absolute control over the company.

Sunac has proposed an “Equity Structure Stabilization Plan,” whereby for every 100 USD in principal allocated to creditors, about 23 USD in new MCBs will be issued to major shareholders. This plan restricts major shareholders from disposing, pledging, or transferring these restricted shares for six years from the date of restructuring effectiveness, although they retain voting rights. This design maintains Sun Hongbin's controlling stake at 23%, ensuring his continued control over the company.

CIFI HOLD GP's plan includes full conversion of the actual controller’s loan of over 500 million HKD, along with a “long-term team equity incentive plan” covering key middle-to-senior management. With this conversion and incentive scheme, the Lin family’s stake in CIFI HOLD GP will remain around 25%, preventing excessive dilution of equity and ensuring the preservation of control; furthermore, a ten-year “long-term team equity incentive plan” is tied to various quantifiable performance indicators, which deepens the alignment of long-term interests between the controlling shareholders, management teams, and creditors.

Maintaining major shareholder status through equity incentives is a common mechanism in restructurings and is foundational for the effectiveness of the restructuring. Industry insiders analyze that if restructuring leads to instability in company control or frequent changes in core management, it exacerbates the situation for companies in recovery, further adversely affecting creditors expecting stock price increases. Therefore, incorporating clauses that retain major shareholder control and include management incentives in corporate plans benefits the continuity of company strategy and serves the long-term interests of creditors and all shareholders.