On March 3, 2020, the Shanghai Third Intermediate People’s Court issued a ruling to accept the bankruptcy restructuring case of Shanghai Yuehe Real Estate Co., Ltd. (“Yuehe Real Estate”) and appointed Fangda as the administrator.
Yuehe Real Estate is the developer of the Yuehe International Plaza. The total construction area of the project is 219,082 square meters. Since its shutdown in 2014, this is one of Shanghai’s largest unfinished building projects. The project debt exceeds RMB12 billion, and there are more than 700 creditors of whom nearly 400 are small owners. Many were put at a distinct disadvantage as a result of losing rights to claims against the debtor before the bankruptcy was submitted to the court.
During the restructuring, under the guidance of the Shanghai No. 3 Intermediate People’s Court and with the support of applicable government departments, Fangda, as the administrator, proposed a plan for restructuring which involved Yuehe Real Estate issuing a debt of common interest (as defined in China’s Enterprise Bankruptcy Law) which was put out to public tender. Shanghai Green Court Investment Holdings Co., Ltd. was selected as the new investor in the project in order that construction could continue. The restructuring plan was approved by a creditors’ meeting and then approved by the Shanghai Third Intermediate Court on July 1, 2021.
Approval for construction to restart on the Yuehe International Plaza was given on September 18, 2021 and there was an official ceremony to resume the project on September 29. Representatives of the administrators, investors and property owners gave speeches to mark the resumption of the project.
At the end of October, a second restructuring investment fund was successfully raised.
The use of the common interest debt in a restructuring case involving unfinished construction is rare and could set a useful precedent for other similar projects as China undergoes a continuing downturn in its real estate market .
In the administration, our partner Nuo Ji acted as the general coordinator, partner Kai Li acted as the team leader of bankruptcy team, partner Guanbing Chen acted as the executive leader, and real estate team partners Stephen Lin and Xinjie Yuan provided professional legal support. Team members also included counsel Deyuan Kou, and associates Guangze Tu, and Lanxin Zhu.
Fangda recently advised on the successful restructurings of Bestway Marine & Energy Technology Co., Ltd. and Dalian Shipbuilding Industry Offshore Co., Ltd.
Fangda has extensive practical experience in bankruptcy and restructuring and is renowned for handling large and complex bankruptcy projects. Our bankruptcy and liquidation lawyers often work closely with our lawyers in banking, capital markets, M&A, real estate, labor, intellectual property, and dispute resolution to deliver comprehensive legal solutions for our clients. Fangda is the first-level administrator of the Shanghai Higher People’s Court and the out-of-province administrator of the Zhejiang Higher People’s Court.