Good afternoon, everyone, and welcome to CIFI Holdings' creditors o pen call. As many of you already know, CIFI has received a convening order from Hong Kong Court on the 23rd of April. In accordance with this order, the company has scheduled to hold a scheme meeting on the 3rd of June. The purpose of today's meeting is to update you on the current business operations of the company, as well as to discuss the overview of the offshore restructuring efforts to facilitate your voting. Before the meeting, we collected the questions that our creditors are particularly concerned about, and these will be covered in the management speech. This meeting will be conducted in both Chinese and English. On behalf of the company, we will first have Mr. Lin Zhong, the Chairman of the Board of Directors, who will share his vision and plans for the company's future, followed by Mr.
Yang Xin, our CFO, who will give you a comprehensive overview of the company's current financial and operational status. Finally, we will welcome Mr. Ma Zhu , who is leading our offshore restructuring process, to provide an update on the restructuring proposal and the timeline. Now, without further delay, let's welcome Chairman Lin, [Foreign language].
[Foreign language]
Good afternoon, everyone. I am Lin Zhong, the Chairman of CIFI Holdings. First, I would like to express my sincere gratitude to all of you for attending this meeting. As the leader of the company, I deeply regret that during our rapid expansion, I failed to adequately manage risks, which led the company into difficulties and adversely affected our trusted partners. On behalf of the Board of Directors, I extend my sincere apologies.
[Foreign language]
Throughout the 900 days of offshore debt restructuring, we fully recognize that the repeated amendments to the restructuring plan have caused significant inconvenience. However, during the most challenging time, both parties engaged in constructive dialogue, continuously showing goodwill that finally led to this consensus. While the industry is still undergoing adjustment, it is your professional work that has enabled CIFI to stabilize its cooperation with us, where we will always remember your trust and goodwill.
[Foreign language]
Today, I would like to take this opportunity to share with you why I have always believed that CIFI can survive and stand back up on its feet, and what makes CIFI different from other privately owned developers. First, what makes CIFI to survive includes one prerequisite, four pillars, and one foundation.
[Foreign language]
One prerequisite: the completion of onshore and offshore debt restructuring is a crucial prerequisite, which can significantly improve our capital structure and balance sheet. As one of the few private developers that still have tens of billions of RMB in attributable net assets pre-restructuring, CIFI will retain sufficient net assets through debt restructuring, avoid insolvency risk, and lay a solid foundation for the future.
[Foreign language]
The first pillar: during the difficult past three years, we retained most of our core teams, whose dedication enabled high-quality delivery of 270,000 [properties]. Our employees' positiveness is widely recognized by investors during their onsite trips. I deeply appreciate it. The second pillar: over the past few years, facing the dual challenges of construction cost repayment and sales slowdown, CIFI has kept its competitive edges, and the projects delivered have won multiple quality awards. Third pillar: as a leading privately owned developer, CIFI has always taken an active attitude towards [self-aptitude] . Leveraging full-scale capabilities, we have stabilized our capital [audio distortion] and force pillars. The enduring culture cultivated through years of Gobi trekking has shaped CIFI's people with resilience. We find hope in perseverance, stand on building, and embrace hardship. For CIFI, we are now conquering another [fun development] Gobi challenge. The One Foundation is directly led by the government's Hong Kong buyers.
With 270,000 high-quality residential properties delivered in the past three years, CIFI ranked number eight countrywide. High-quality delivery records will become an important cornerstone for our recovery.
[Foreign language]
[audio distortion] We are phasing out the unsustainable three highs: high leverage, high turnover, high debt model. Instead, we shift to the sustainable model of low debt, light assets, and high quality, with a focus on premium residential capabilities.
[Foreign language]
In the future, CIFI will focus on three core businesses. First, local rental business. Managing over RMB 46 billion premium office and retail properties in top cities like Beijing, Shanghai, and Chengdu, generating an annual rental income of RMB 1.8 billion. Growth is steadily maintained through operational enhancements. Second, highly focused self-developed projects, narrowing down into different presence in core cities to capture urban upgrade opportunities. Number three, asset management business. Leveraging CIFI's strengths, we will vigorously develop our asset management business, learning from [Blackstone Business Firm]. CIFI's asset management arms have preserved its key talents and core competencies. Our dual GP structure, which is capital partners lead fundraising while project teams focus on operations, will keep us competitive. This asset-light approach avoids heavy leveraging while aligning interests.
[Foreign language]
In response to the reality that the traditional development model has become ineffective in the industry, during this round of adjustment, we have established five core strategies. Number one, regional focus, concentrating resources in core markets. Number two, premium product strategy, with focus on creating high-quality upgraded properties as our core product direction. Number three, for good strategy that creates a value chain of good houses, good services, good communities, and good lives. Number four, to apply efficiency improvement strategy that includes the 2070 Project, targeting a 20% premium and a 70% turnover rate, and the 3,500 Project, keeping construction costs less than RMB 3,500 per sq m, to refine our operations through lean management and AI thinking, and to reshape our supply chain towards a client-centered and value-oriented model. Number five, steady operation strategy that emphasizes quality and efficiency over speed and scale.
[Foreign language]
Upgrade financial and risk control system. The crisis has prompted us to deeply reflect on the past month. We will establish clear financial red lines, strengthen our resilience to secure the company's cross-cycle development in the next 30 years.
[Foreign language]
CIFI kept its three core competencies after 25 years of development. Number one, full-cycle expertise. With 25 years of experience, it has standardized the product system and a complete team, covering the entire development cycle from fundraising, investments, construction, management, and expenses. Number two, diversified operations. CIFI has the ability to operate and coordinate across the real estate business chain, integrating the operation experience of property management, rental housing, commercial properties, forming a differentiated competitiveness in a complex market environment. Our subsidiary, Ever Sunshine Services, ranks among the top nine in the property management sector, with its business covering more than 100 cities and a managed area of 350 million sq m. Our leading brand, Lingyu, is managing 130,000 units, ranking among the top four in the industry, and has become a core partner for the local governments in revitalizing government-owned assets. Number three, strategic footprint.
CIFI has a strategic footprint with deep-rooted presence in China's key economic zones, such as Yangtze River Delta, and relies on local resources to achieve the mountain business layout.
[Foreign language]
[audio distortion] in recent years, I was always being told that CIFI is different from other private developers. I think there are several [audio distortion] . First, CIFI's interest-bearing debt is at a relatively low level among top private-owned developers. By the end of 2024, it was RMB 86.6 billion, with unsecured debts accounting for 70%. After the restructuring, the total outstanding amount and net debt ratio will be significantly reduced. Second, under the delivery crisis, CIFI still managed to deliver a total of 270,000 housing units in the past three years, with a delivery rate of 95%. The subsequent delivery pressure has relatively eased, and our performance is well recognized by the government. Third, in the face of the pain of industry transformation, CIFI has a decade-long competitiveness in real estate chain operations, which provides the drivers for compound growth.
Fourth, when people choose or are forced to leave the sector, we retain most of our core teams, preserving our human capital for the future. Fifth, the CIFI team embodies the most positive mindset. We never give up. During the industry's adjustment period, we have maintained a normal operation with a strong team cohesion and a stable organizational structure. Sixth, while some are still wavering in where to go, CIFI has a clear and firm direction moving forward, with a strong consensus among all levels enabling our partners of concrete pace.
[Foreign language]
The process from survival to complete recovery is still full of difficulties and challenges. Currently, we are at a crucial moment of climbing over five substantial obstacles. The first stage is to repair the balance sheet through debt restructuring. The second stage is to gradually restore credit, which requires time and market testing. The third stage is to retain a certain amount of funds from operations, resume investment, and expand prudently within a safety margin. The fourth stage is to resume profitability under the new model. The last stage is to resume dividend distribution. Although the road ahead is full of challenges, after three years of trial and error, the CIFI management team is still full of fierce resolution. We are confident in leading all employees to overcome challenges with full force, living up to the expectations of all stakeholders and creating value for them.
[Foreign language]
Finally, I would like to thank all the creditors again for standing by the company in the past three years. Never give up during a complex market environment is my motto. An excellent team of CIFI gives me all the confidence. I maintain a wavering confidence in CIFI's long-term growth prospects and firmly believe in the investment value of our stock. We are well aware that effecting change is never smooth sailing, but we will always have the courage to carry out reforms and embrace changes with the spirit of entrepreneurship. Thank you all.
Thanks, Lin Zhong. Now we'll have Mr. Yang Xin. [Foreign language].
[Foreign language]
Good afternoon, everyone. I am Yang Xin, the CFO of CIFI Holdings. I am honored to have the opportunity to engage in such a large-scale conference with all of you again after three years. Recently, we have been communicating with onshore and offshore investors. Their common views are, first, the Chinese real estate cycle has reached its lowest, while CIFI can become a market model of private enterprise transformation after this round of crisis. Second, the stability of the company's management team is well preserved, and they are optimistic about the potential return brought about by value repair after share conversion and industry recovery, and have clearly expressed their preference to fully convert their bonds into shares.
[Foreign language]
As the company's Director and CFO, I think the restructuring plan holds a significant strategic value for CIFI, allowing the company to obtain a valuable window to operate with a lighter burden.
[Foreign language]
To start, CIFI is one of the few private-owned developers whose total assets still exceed liabilities before the holistic restructuring, with shareholders' equity exceeding RMB 10 billion by the end of 2024. Meanwhile, the company's attributable land bank values approximately RMB 130 billion, mainly located in key cities such as Beijing, Guangzhou, Chengdu, Taiyuan, Chongqing, and Wuhan. In addition, we have investment properties with an estimated value of about RMB 46 billion, generating nearly RMB 1.8 billion rental income in 2024, representing a year-on-year increase of approximately 10%.
[Foreign language]
Furthermore, as of the end of 2024, the group's interest-bearing liabilities decreased to RMB 86.6 billion, a 30% lower compared to its peak, mainly due to the repayment of development loans after the delivery of existing properties. During a significant downturn, CIFI has maintained a firm relationship with its core bank partners.
[Foreign language]
Currently, onshore and offshore unsecured debt account for 70% of CIFI's overall debt, and all restructuring efforts strictly follow market practices. Offshore restructuring has achieved milestones, while onshore extension of medium-term notes and CMBS debts was completed. The holistic restructuring of RMB 10 billion onshore corporate bonds is currently underway, which will refer to offshore and onshore comparable cases and to be proposed based on the company's liquidity position, capital structure, and asset portfolio. Our goal is to maintain alignment between both onshore and offshore holistic restructuring.
[Foreign language]
The major feature of offshore restructuring is the debt-to-equity conversion, while the onshore is debt-for-assets swap. It is expected that after the completion of the restructuring, the scale of unsecured debts will be reduced by more than 50% to the level below RMB 30 billion. The tenor will be largely extended to 9 years-10 years, and the interest rates will also be adjusted down to an affordable level.
[Foreign language]
Other than the unsecured debts, the secured interest-bearing liabilities amount to approximately RMB 26 billion, nearly 1/3 of which are commercial property loans, and the remaining 2/3 are mainly development loans. Development loans will be repaid following project sales and deliveries, and by continuously improving the operating efficiency of investment properties, LTVs of commercial property loans will also be improved, allowing more refinancing opportunities.
[Foreign language]
In summary, through holistic onshore and offshore restructuring, the absolute value of CIFI's interest-bearing liabilities will be reduced significantly, improving the maturity profile and lowering financing costs. Meanwhile, with the benefit of restructuring, the company's net assets will be largely increased. As a result, we expect CIFI's net debt ratio will soon return to the healthy level.
[Foreign language]
Finally, I would like to suggest that our creditors give priority consideration to the debt-to-equity conversion option for the following reasons: with the liquidity of stocks surpassing that of interest-bearing debt and offering significant upside potential, debt-to-equity conversion not only optimizes the capital structure but also provides creditors with flexible exit options and opportunities for future value appreciation. With $6.8 billion offshore debt being successfully restructured, we expect a healthier debt structure which builds a foundation for recovery, converting creditors into shareholders aligned interests with the company's growth, boosting confidence for management to maximize value for major stakeholders. Last but not least, CIFI's deep expertise in asset-like operations, backed by seasoned teams across sectors, will unlock value of [FLISCO] under its new post-restructuring era.
[Foreign language]
That's all for me today. Now I will pass to Zhong. [Foreign language].
[Foreign language]
Good afternoon, everyone. I am Zhu Gaoming, the person in charge of the overseas restructuring of CIFI Holdings. Thank you for joining this call. Now I will walk you through the details of the offshore debt restructuring plan.
[Foreign language]
Facing an extended period of rapid decline in the industry, CIFI has adheres to the belief of taking a step back to keep moving forward. With understanding and the support of all the creditors, we are one step closer to our major goals of the offshore restructuring, which are reducing the debt burden, achieving business transformation, and rebuilding our credit. After the RSA was launched last year, creditors representing nearly 90% of the in-scope debts have signed up to the RSA. We truly appreciate your continuous understanding and support. Following the convening order granted by the High Court of Hong Kong, we are pleased to open up the scheme voting last week. To facilitate your voting process and option selection, let me walk you through some of the key points.
[Foreign language]
The in-scope debt totaling a principal of $6.8 billion includes 10 senior bonds, 1 perpetual bond, 1 convertible bond, and 13 offshore loans. Taking into account different demands of creditors and following the principle of debt restructuring for the short term, equitization for the medium term, and principal protection for the long term, the scheme offers multiple options for creditors. There are five categories of options.
[Foreign language]
Option 1A or 1B offers that 32% of the existing debt will be converted into new zero-coupon bonds or loans. The term is two years and can be extended to three years. The remaining principal will be repaid at 100% of home maturity. At the end of 12 months from the reference date, the company can repay up to 30% of the remaining principal at a price of 75%, which is 24% of the principal of the existing debts.
[Foreign language]
Creditors who choose option 2A or 2B will proportionately share the upfront cash of $35 million, which will be repaid in three installments within one year from the restructuring effective date. If a creditor selects option 2A, 90% of the existing debts will be converted into a four-year zero-coupon Mandatory Convertible Bond with a conversion price of HKD 1.6 per share, and the mandatory conversion will be carried out over four years. MCB holders are also allowed to voluntarily convert the bonds without any limit at any time. If a creditor selects option 2B, 60% of the existing debts will be converted into the MCB, and 30% will be converted into the new medium-term notes with a term of 4.5 years and a coupon rate of 2.75%.
[Foreign language]
Option 3 is a principal preservation option for creditors who prefer to hold bonds for longer term. Option 3 and option 5 will proportionately share the upfront principal of $5 million. The remainder will be converted into the new long-term notes with a coupon rate of 1%-1.25%. The long-term instrument bears an initial tenure of six years. Given necessary conditions met, the company has the right to extend the tenure up to nine years on a yearly basis.
[Foreign language]
Creditors who choose option 4A or 4B will convert 50% of their existing debts into new bonds or loans with a coupon rate of 1%. The initial tenure is 4.5 years, with the company having the right to extend the term up to five years.
[Foreign language]
Option 5A and option 5B are principal preservation options for creditors who prefer to hold loans. Again, option 5A and 5B will proportionately share the upfront principal of $5 million with option 3, and the remainder will be converted into the new long-term loans denominated in USD or RMB. The new long-term loans bear the same terms as the new long-term notes under option 3.
[Foreign language]
Creditors can select any of or any combination of the above options. In addition, the scheme intends to safeguard interests of creditors through a variety of credit enhancement measures involving offshore assets, WFOEs, and onshore assets. The controlling shareholder will also support restructuring by converting shareholder loans into equity and suspending receiving cash dividends.
[Foreign language]
As you can see, different instruments offered by the scheme allow creditors to make choices that are catered to their own best interests. Especially considering the offshore creditors' appetite for capital market flexibility, the scheme specifically sets up the debt-to-equity conversion options being the option 2A and option 2B with no size cap. This not only prepares immediate cash compensation for creditors but also arranges a more liquid exit channel and enables creditors to share the potential equity benefits after the company is back on its feet. By providing this option, the company also hopes to express its confidence in recovery and its determination to pay back creditors and shareholders.
[Foreign language]
Finally, I would like to introduce the timetable. The restructuring is now in the most critical stage. The scheme and consent solicitation voting has started. The deadline for the custody instruction is at 5:00 P.M. on May 26th. The deadline for the submission of account holders' letter and lender proxy forms for voting and option selection is at 5:00 P.M. May 28th. Please act swiftly to avoid any unexpected circumstances at the last minute. After the above deadlines, the scheme meeting is scheduled on June 3rd at 8:00 P.M., and the sanction hearing is scheduled on June 26th before the High Court of Hong Kong. We sincerely ask all creditors to vote in support of the scheme, and thank you.
Thank you, Chairman Lin, Yang Xin, and Zhu Zong, and thanks to those who spent time participating in today's call.
Please note again, for bondholders under the scheme, the custody instruction deadline is 26th of May, and the account holder letter submission deadline is 28th of May. For lenders under the scheme, the lender proxy form submission deadline is 28th of May, and for holders of CBs and perps, consent instruction deadline is 28th of May. Please note your own custodian might have an earlier deadline than the official ones, so we advise you to check with them to ensure the on-time submission. As you can see from the screen being shared, please ensure you leave sufficient time to meet the various deadlines of the scheme and the consent solicitation. If you have any further questions, you may contact Haitong International as the company's financial advisor, Linklaters as the company's legal advisor, and Kroll as the information agent. Thank you and have a good day. Goodbye.