In Re Country Garden Holdings Company Limited [2026] HKCFI 1619, the Honourable Madam Justice Linda Chan sanctioned, on 4 December 2025, a scheme of arrangement restructuring approximately USD 14.5 billion of offshore debt between Country Garden Holdings Company Limited (the “Company”) and its scheme creditors.
Factual Background
The case arose out of severe financial difficulties faced by the Company due to unprecedented challenges in the real estate sector in the Chinese mainland. The Company, the ultimate holding company of a major property development group, sought to restructure its offshore indebtedness to alleviate liquidity pressures and reduce its annual debt servicing costs.
Following complex and protracted negotiations spanning over 20 months with an ad hoc group of noteholders and a co-ordination committee of bank lenders, the Company proposed a scheme of arrangement. The scheme sought to compromise over USD 14.5 billion of existing debt, offering creditors a choice among five options comprising cash, new medium- and long-term debt instruments, and mandatory convertible bonds.
The scheme creditors were divided into two classes: lenders under existing syndicated loans (Class 1) and essentially unsecured creditors of the Company (Class 2). The resolution to approve the scheme was overwhelmingly passed, with 83.71% in value of Class 1 and 96.03% in value of Class 2 voting in favour.
Decision
Following a hearing on 4 December 2025 before the Honourable Madam Justice Linda Chan, the Court sanctioned the scheme. The Court was satisfied that the scheme was for a permissible purpose, the creditors were properly classified, the statutory majorities were obtained, and the scheme was one that an intelligent and honest man might reasonably approve.
The sanction followed an earlier convening hearing where the Court had identified a number of issues to be addressed further. By the sanction hearing, the Company had taken further steps to address each of these issues.
Key Takeaways
- Clarity of the Explanatory Statement – The Court considered that the original draft Explanatory Statement presented the five consideration options in great detail , however a clear summary of what creditors would receive in monetary terms, with a summary of the five options and the caps and reallocation mechanism would be useful . The Company included a flowchart and illustrative tables in the final Explanatory Statement that made the effect of the scheme more easily to understand for the creditors.
- Dissenting Creditors – At the hearing, one of the lenders,Tai Fung Bank, opposed the inclusion of its loan in the Scheme due to concerns relating to its rights over onshore credit support post-Restructuring. That issue was resolved after the Convening Hearing by a Standstill Deed, under which the loan was excluded from the Scheme, and Tai Fung agreed not to enforce against the Company in Hong Kong until 31 December 2030. While Tai Fung may still pursue direct action against the Company in the Mainland, the Court was satisfied that the Scheme would not be jeopardised or affected, as the Company has no assets in Mainland which may be subject to enforcement.
- Third-party releases and Indemnities – The Court accepted qualified liability releases for third party obligors and third parties in relation to the Restructuring and the Scheme because, absent those releases, creditors could pursue them and thereby undermine the restructuring through “ricochet claims”. At the same time, the Court sanctioned the scheme after the Company confirmed that the indemnity in favour of administrative parties would be amended to apply only“to the extent that such indemnification is enforceable under the applicable law”.
Read the judgment here: https://legalref.judiciary.hk/lrs/common/ju/ju_frame.jsp?DIS=178590&currpage=T
Mr Jose Maurellet SC leading Mr Look Chan Ho, instructed by Linklaters, acted for the Company at both the convening and the sanction hearing.
Mr Jason Yu acted for the Ad Hoc Group of Noteholders at the convening hearing.
Mr Victor Dawes SC and Mr William Wong acted for Tai Fung Bank at the convening hearing.
