Re Country Garden Holdings Company Ltd

HCMP 1366/2025

[2026] HKCFI 1619

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1366 OF 2025

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REASONS FOR JUDGMENT

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1.At the hearing of the petition presented by Country Garden Holdings Company Limited (碧桂園控股有限公司) (“Company”) on 25 November 2025, I sanctioned the scheme between the Company and the “Scheme Creditors” (as defined in §20 below) upon the Company’s confirmation that it will amend clause 10.7 of the Scheme to make clear that the indemnity in favour of the Administrative Parties only applies “to the extent that such indemnification is enforceable under the applicable law”. These are the reasons for my judgment.

A.  BACKGROUND

2.The Company was incorporated in the Cayman Islands on 10 November 2006 and has been registered as a non-Hong Kong company under Part 16 of the Companies Ordinance (cap. 622) (“CO”). Its shares have since 20 April 2007 been listed on the Main Board of the Stock Exchange of Hong Kong Limited (“HKEx”) (stock code 2007)[1].

3.The Company is an investment holding company and holds equity in subsidiaries and associated companies incorporated in numerous jurisdictions (together “Group”). The Group engages in property development, construction and other businesses, primarily in Mainland China and has significant international operations including the Forest City Project in Malaysia[2].

4.As at 3 September 2025, approximately 51.94% of the Company’s issued shares are beneficially owned by Ms Yang Huiyan (“Controlling Shareholder”), and the remaining shares are held by other shareholders including the general public[3].

5.The Group encountered severe financial difficulties arising from challenging state of the real estate sector in Mainland China and significant reduction in access to onshore bank lending and offshore capital markets[4]. As at 31 December 2024[5]:

(1)  The Group’s assets were RMB 1,035.84 billion while its liabilities were RMB 984.59 billion.

(2)  The Company’s total assets were RMB 160.96 billion whereas its total liabilities were RMB 168.23 billion.

6.To address these challenges, the Company engaged Houlihan Lokey (China) Limited and China International Capital Corporation Hong Kong Securities Limited as financial advisers, and has since April 2024 been actively negotiating with an ad hoc group of noteholders (“AHG”) and a co-ordination committee of bank lenders (“CoCom”) together with their respective advisers[6].

7.The negotiations between the Company, AHG and CoCom spanned over 20 months with 13 rounds of restructuring proposals exchanged. A particularly contentious intercreditor issue concerned the additional credit enhancement (SSA Credit Support, see §13 below) granted in favour of lenders under Existing Syndicated Loans as part of a loan refinancing exercise implemented in 2023. After extensive negotiations, the parties reached a consensus that lenders of the Existing Syndicated Loans will receive compensation totalling US$178 million in exchange for releasing all their rights under SSA Credit Support, thereby permitting the underlying assets to be shared with all holders of the New Instruments to be issued under the Scheme[7].

8.These negotiations culminated in the Company entering into a restructuring support agreement on 11 April 2025 (“Original RSA”) with AHG, initially comprising creditors representing approximately 29.9% of the outstanding principal of Existing Notes. The Original RSA incorporated certain terms subject to further negotiation regarding the security compensation amount. Following further extensive negotiations and a principal-to-principal meeting between creditor groups, the Company executed a deed poll on 23 June 2025 implementing the security compensation on terms satisfactory to CoCom, and subsequently entered into an amendment agreement on 18 August 2025 (“Amendment Agreement”, together with the Original RSA, “RSA”) which incorporated detailed commercial terms and provided flexibility for differential treatment of the 2 classes regarding RSA fee deadlines[8].

9.Ever Credit Limited, the petitioner in the petition in HCCW 116/2024 against the Company, acceded to the RSA on 25 August 2025, and the petition has been adjourned to 5 January 2026[9].

10.If the Scheme is not implemented, the Company would likely be placed in liquidation, which would result in a significantly lower estimated recovery to the Scheme Creditors[10]:

(1)  Under the Restructuring, the weighted average recovery for Scheme Creditors (on net present value basis) is estimated at 21.1% to 54.0% for Class 1 creditors, and 17.8% and 51.1% for Class 2 creditors. The Recovery Analysis is based on a series of assumptions, including the Company being able to honour its payment obligations under the New Instruments (which form part of the Scheme Consideration Entitlement) to be issued.

(2)  According to the Liquidation Analysis prepared by Kroll, under liquidation scenario, the estimated rate of recovery is 9.3% to 11.9% for Class 1 creditors, and 2.8% to 6.8% for Class 2 creditors.

B.  PURPOSE & SCOPE OF SCHEME

11.The Scheme and the Restructuring to be implemented before the Restructuring Effective Date (“RED”), is designed to improve the liquidity of the Company and the Group through[11]:

(1)  Reducing the Group’s offshore indebtedness by more than USD10 billion;

(2)  Reducing the interest rates of 2.70% to 8.00% per annum (under Existing Notes) and 2.92% to 3.90% per annum plus applicable Term SOFR/HIBOR rates (under Existing Loans) to 1% to 4.29% per annum under the New Instruments; and

(3)  Extending the maturity dates of the outstanding principal to 2027 up to 2036.

12.The Scheme seeks to compromise and discharge 2 categories of offshore debts of USD14.54 billion in outstanding principal as at 31 December 2024 (together “Existing Debts”)[12], subject to exclusion of the “TF Loan” discussed in Section E2 below[13]:

(1)  “Existing Loans” with aggregate outstanding principal of  USD4,281,782,837, which comprise:

(a)  3 Hong Kong law governed dual-currency syndicated loans (USD3.62 billion) (“Existing Syndicated Loans”);

(b)  One Hong Kong law governed bilateral loan;

(c)  One Hong Kong law governed dual-currency bilateral loan; and

(d)  12 PRC law governed bilateral loans with the Company as guarantor, which also benefit from onshore credit support (“Existing Loans (Onshore Credit Support)”).

(2)  “Existing Notes” with aggregate outstanding principal of   USD10,259,823,385, which comprise:

(a)  15 series of USD-denominated New York law governed senior notes (“Existing Public Notes”) issued by the Company; and

(b)  2 series of HKD-denominated English law governed convertible bonds issued by Smart Insight International Limited and guaranteed by the Company (“Existing HKD Convertible Bonds”).

13.Amongst the Existing Debts, Existing Syndicated Loans are also secured by (1) the guarantees provided by, and the security over the shares of, 9 offshore subsidiaries within the Group (“ICA Credit Support”); and (2) the additional guarantees and security interest over the shares of 11 offshore companies within the Group pursuant to a security sharing agreement (“SSA Credit Support”)[14].

14.The Scheme does not compromise the following categories of debts (both onshore and offshore), which amounted to USD112,856,664,673 and represent 82.5% of the total liabilities of the Group as at 31 December 2024[15]. The reasons for excluding these debts from the Scheme have been explained by the Company and may be summarised as follows[16]:

(1)  Offshore project financings (US$394 million): These are facilities in Malaysia, Indonesia, Australia, Thailand and the United States, which are fully or substantially fully collateralised.  The Company believes that it is highly unlikely that these creditors would agree to participate in the Scheme given their secured positions, and if made subject to the Scheme, they would likely enforce the credit support, thereby reducing the returns available to other offshore creditors. None of these creditors have taken enforcement action against the Company, and the Company does not expect them to do so given that the underlying financings have been serviced and not in default.

(2)  Chong Hing Bank Facility (USD35 million): The Company has engaged bilaterally with Chong Hing Bank Limited regarding a facility secured over the shares owned by Wise Fame in a venture capital fund. After various rounds of negotiations, the parties reached a bilateral agreement to be implemented in parallel with the Restructuring, whereby the Company will issue new mandatory convertible bonds on  RED in exchange for the discharge of the Company’s liability under the facility.

(3)  Onshore liabilities (USD18.28 billion): The Group has onshore bank loans and other borrowings of USD17.48 billion (including RMB 1.05 billion term loan from Agricultural Bank of China for which the Company has provided a letter undertaking to repay the same), and onshore corporate bonds of USD805 million.

(4)  Shareholder loans (USD1.15 billion): 3 shareholders loans advanced by Concrete Win Limited (a vehicle of the Controlling Shareholder) will not be compromised under the Scheme, but will be written off or converted into equity under the Restructuring.

(5)  TF Loan (USD116.9 million): Following execution of the Standstill Deed on 29 October 2025, the TF Loan has been excluded from the Scheme[17]. This was done to address the concerns raised by the lender at the Convening Hearing, essentially on the ground that the TF Loan is heavily collateralised, such that the proposed release of the lender’s rights over the collateral without compensation would be unfair.

15.According to the pro forma consolidated balance sheets prepared by the Company, upon implementation of the Scheme and the Restructuring, the Group and the Company will be able to improve their financial position in that[18]:

(1)  The Group’s consolidated net current liabilities of RMB 25,865 million (as at 31 December 2024) will be improved to consolidated net current assets of RMB 90,109 - 92,134 million (as at RED); and

(2)  The Group’s consolidated net assets will be increased from RMB 51,524 million (as at 31 December 2024) to RMB 90,546 -125,571 million (as at RED), depending on the extent to which Scheme Creditors elect for converting their Claims into shares in the Company.

C.  RESTRUCTURING

16.As part of the Restructuring, the Forest City Project will be sold to the Controlling Shareholder for USD50 million (“CGPV Acquisition”). According to the Company:

(1)  It would not be for the benefit of the Group to continue to invest in the Project given that it is expected to have negative equity value and requires significant capital injections, which is inconsistent with the objectives and the restrictions under the New Instruments.

(2)  The Controlling Shareholder is best placed to ensure continuity and potential value preservation for all stakeholders. Completion of CGPV Acquisition will be independently reviewed/verified by Kroll for the benefit of AHG and CoCom. The finalised terms of CGPV Acquisition are summarised in the Explanatory Statement[19].

(3)  If CGPV Acquisition completes within 6 months of RED, the Controlling Shareholder will issue a contingent value right (“CVR”) in favour of Scheme Creditors (represented by a CVR Agent) stapled to the MTN, MTL, LTN, LTL and the SCA Loan, which entitle the holders to receive pro rata net cash consideration (after taxes and transaction expenses) realised from any disposal within 9.5 years after CGPV Acquisition, less USD50 million. If this happens, the Scheme Creditors will get an upside of 15%. However, as CGPV Acquisition may not happen, the additional return has not been included as part of the estimated recovery under the Scheme.

(4)  If CGPV Acquisition does not complete within 6 months of RED, no CVR will be issued and the Forest City Project will remain in the Group[20].

17.In further support of the Restructuring, the Controlling Shareholder will:

(1)  write off shareholders loans in the amount of USD 50 million as part of the consideration for CGPV Acquisition;

(2)  subordinate the remaining shareholders loans to the amounts due under the New Instruments to be issued under the Scheme;

(3)  use the remaining balance of shareholders loans to subscribe for shares in the Company at the initial conversion price of HKD0.60 per share, or subscribe for shareholder warrants at the initial strike price of HKD0.60 per share and exercise those warrants, in tandem with MCB conversions so as to maintain at least 40% shareholding on a fully diluted basis;

(4)  accept scrip dividends if declared; and

(5)  maintain no less than 30% shareholding in the Company[21].

18.The Company will implement a Management Incentive Plan under which up to 5% of issued shares (on a fully diluted basis) may be granted to management and key employees (except Controlling Shareholder), with vesting linked to performance criteria including New Instruments’ payment milestones and share price performance, subject to lock-ups and other conditions[22].

19.As part of the Restructuring[23], the Company launched a Consent Solicitation to seek approval from the holders to change the governing law of HKD Convertible Bonds from English law to Hong Kong law. On 5 November 2025, the change was approved by (1) 1,476 out of 1,477 votes (99.93%) of the holders of the Existing HKD Convertible Bonds due 2023, and (2) 3,014 out of 3,014 votes (100.00%) of the holders of the Existing HKD Convertible Bonds due 2026[24].

D.  PRINCIPAL FEATURES OF SCHEME

D1.  Existing Debts and Scheme Consideration Entitlement

20.The “Scheme Creditors” are holders of the Existing Debts. Under the Scheme:

(1)  “Scheme Claims” is defined as (a) Existing Debts, inclusive of all outstanding principal and interest accrued up to the Record Date (31 October 2025)[25], and (b) Scheme Creditors’ claims against certain third parties (discussed in §27 below), which will be discharged in exchange for Scheme Consideration Entitlement[26].

(2)  The amount of “Scheme Consideration Entitlement” which a Scheme Creditor is entitled to receive is to be determined by reference to “Scheme Consideration Claim”, which is defined as[27]:

(a)  The outstanding principal of the Scheme Claims (for Class 1) as at the Record Date less any “SCA Day 1 Payment”;

(b)  The outstanding principal of the Scheme Claims (for Class 2) as at the Record Date; and

(c)  The accrued and unpaid interest (including default interest) up to and including 30 September 2024.

(3)  The upshot of the above is to achieve a discharge of Existing Debts up to the Record Date, but excludes any interest accrued on the outstanding principal of Existing Debts during the period from 1 October 2024 to 31 October 2025 when calculating the Scheme Consideration payable to the Scheme Creditors.

21.The Scheme Consideration Entitlement, said to have been “designed to balance heterogeneous creditor preferences while preserving post-Restructuring sustainability”, is far from straight-forward. In the draft Explanatory Statement considered at the Convening Hearing, the various Options were presented with great details but without any summary or indication (let alone one written in clear language) as to what Scheme Creditors would receive in monetary term under the various Options. This was exacerbated by the fact that 4 out of the 5 Options would be subject to a cap which, if reached, would trigger an elaborate allocation mechanism. Such presentation would not serve the statutory purpose of an explanatory statement, which is to “explain the effect of the arrangement or compromise” (s.671(3) of the CO).  

22.To address the concern raised by this Court at the Convening Hearing, the Company included a flow chart and illustrative tables in Appendix 16-1 which are more comprehensible. As explained by Mr Jose Maurellet SC[28], the Scheme Consideration Entitlement works in this way:

(1)  Each Scheme Creditor is entitled to choose amongst 5 Options. However, it is not in any real sense a choice as it is subject to “an allocation framework”, which “includes aggregate caps and fallbacks to reallocate oversubscriptions in a fair and predictable manner; non-electors are defaulted to a liquidation-plus cash tender or, failing headroom, to a debt/equity mix”[29].

(2)  The Scheme Consideration Entitlement under the 5 Options is a combination of (i) cash of USD200 million; (ii) non-interest bearing mandatory convertible bonds series A (“MCB (A)”) up to USD 2 billion; (iii) medium term notes (“MTN”), medium term loans (“MTL”) and non-interest bearing mandatory conversion bonds series B (“MCB (B)”) up to USD 8.21 billion; (iv) long term notes series B (“LTN (B)”) and long term loans series B (“LTL (B)”) without any cap.

(3)  Option 1 – Cash tender: Scheme Creditors may participate in an “Unmodified Dutch Auction” to receive cash consideration up to a cap of USD200 million. Valid bids cannot exceed USD100 per USD1,000 of Scheme Consideration Claims and will be accepted in ascending order of price until the cap is reached.

(4)  Option 2 – 100% equity‑linked: Scheme Creditors receive MCB (A) in principal amount equals to 100% of the Scheme Claims, with a maturity of 78 months after the “Reference Date” (30 June 2025), with an initial conversion price of HKD2.60 per share, voluntary conversion, periodic mandatory conversion from 2027, issuer call at staged cash prices (30%/35%/45%/50% within years 1–4), and maturity conversion. Option 2 is subject to a cap of USD2 billion.

(5)  Option 3A/3B – Balanced medium-term: Scheme Creditors receive a blend of (i) MCB (A) equals to 67% of the Scheme Consideration Claim and (ii) a new medium-term instrument equals to 33% of the Scheme Consideration Claim, being either a USD-denominated New York law governed MTN for Option 3A or MTL for Option 3B. MTN/MTL carries 2.50% per annum interest, payable semi-annually, with the ability for the Company to pay part of interest in kind (subject to a 1% minimum cash interest), accrues 5% on capitalised interest, amortises progressively (including at least 2% at completion and at least 52% by 31 December 2031), and matures 90 months after the Reference Date (subject to acceleration to 30 June 2032 if onshore contract sales exceed defined thresholds). Options 3A and 3B (together with MCB (B) described below) are subject to a cap of USD8.21 billion.

(6)  Option 4A/4B – Balanced long-term: Scheme Creditors receive (i) MCB (B) [30] equals to 35% of the Scheme Consideration Claim and (ii) new long-term instrument equals to 65% of the Scheme Consideration Claim, being either USD-denominated New York law governed LTN (A) for Option 4A or USD-denominated loan LTL (A) for Option 4B. LTN (A)/LTL (A) carries 2.00% per annum interest, with defined periods in which the Company may pay interest in kind (subject to a 0.5% minimum cash interest between 2027 and 2030), a 2.25% rate on capitalised interest, a maturity of 114 months after the Reference Date (or 30 June 2034 if cumulative onshore contract sales thresholds are met earlier), and a mandatory redemption of at least 50% of original principal on 31 December 2033. Option 4 has no cap.

(7)  Option 5 – 100% long‑term debt: Scheme Creditors receive a single new long-term instrument equals to 100% of the Scheme Claim, being either LTN (B) in public note form for Option 5A or LTL (B) in loan form for Option 5B. LTN (B)/LTL (B) carries 1.00% per annum interest, with defined PIK flexibility (subject to a 0.5% minimum cash interest from 2027 to 2031), a 1.25% rate on capitalised interest, a maturity of 126 months after the Reference Date (if the aggregate principal amount of LTN (B)/LTL(B) is less than or equal to USD540 million) or 138 months after the Reference Date (if the aggregate principal amount of LTN (B)/LTL(B) exceeds USD540 million) (in each case subject to a 6-month acceleration if cumulative onshore contract sales thresholds are met), with optional redemption and mandatory redemption features. Option 5 is subject to a cap of USD1.5 billion.

(8)  As part of the allocation mechanism, if any Option is oversubscribed, Scheme Creditors will be re-allocated according to what has been described as “a waterfall”[31] in that:

(a)  Option 1 oversubscription flows to Option 2 then Option 4A;

(b)  Option 2 oversubscription flows to Option 3 then Option 4; and

(c)  Option 3 and 5 oversubscription flows to Option 4.

(9)  The allocation mechanism for those Scheme Creditors who do not make any election by the Voting Instruction Deadline is as follows:

(a)  If Option 1 cap is not reached, Scheme Creditors will be allocated Option 1. Following this Court’s observations at the Convening Hearing, the Company has amended Option 1 Valid Offer Price (Default) mechanism[32], which is now fixed at USD48/USD62 per USD1,000 (Class 1/Class 2), by reference to the mid-point of liquidation recoveries plus 0.1% (“Objective Benchmark”)[33] (as opposed to a subjective benchmark).

(b)  If Option 1 cap is reached, Scheme Creditors will be allocated to Option 4A.

D2.  Security Compensation Amount for Class 1

23.A critical commercial term concerns the security compensation amount (“SCA”) payable to Scheme Creditors (Class 1) as compensation for compromising their existing claims to SSA Credit Support, which is essential for the assets in question to be released and form part of the common security package for the New Instruments[34]. SCA is in the amount of USD178 million and will be paid in the following manner:

(1)  SCA Day 1 Payment: USD89 million cash, payable on RED;

(2)  SCA Loan: US$89 million Hong Kong law governed term loan with 24-month maturity, interest at 4.29% per annum (minimum 2.50% cash interest), with USD45 million amortisation on the first anniversary and optional early prepayment rights; and

(3)  SCA Warrants: Bank lenders under SCA Loan may elect to subscribe for warrants exercisable at HKD0.60 per share in exchange for setting off the amounts owed under SCA Loan.

24.Some of the New Instruments viz., MTN, MTL, LTN, LTL, SCA Loan and MCBs, will benefit from a newly created common credit support package, which comprises[35]:

(1)  guarantees from certain offshore members of the Group;

(2)  security interests granted by and over certain offshore members of the Group; and

(3)  security interests over offshore bank accounts augmented by a cash sweep of the net disposal proceeds of specified projects.

D3.  RSA Fees & Work Fees

25.The RSA provides for fees payable to acceding creditors in the form of MCB (A), with bifurcated deadlines following the Amendment Agreement of 18 August 2025[36]:

(1)  Early-Bird RSA Fee: MCB(A) equals to 0.10% of principal for those acceding by the applicable deadline (extended to 25 August 2025 for Class 2 and 4 November 2025 for Class 1[37].

(2)  General RSA Fee: MCB(A) equals to 0.05% of principal for those acceding after the Early-Bird deadline but before the General deadline.

(3)  The difference in fee reflects the fact that Class 2 creditors had over 3 months to accede with 77% accession by 18 August 2025, while bank lenders in Class 1 needed more time for internal approval processes that in some cases could not start until execution of the Deed Poll on 23 June 2025.

26.The Company agreed to pay Work Fees to major creditor groups which had been actively involved in the negotiations on the terms of the Restructuring, details as follows[38]:

(1)  AHG Work Fee: AHG receives USD19 million cash, 483,600,000 shares in the Company, and USD2.78 million face value of MCB(A) (subject to the final calculation of the surplus RSA Fee), totalling USD55.58 million[39]. This represents 1.73% of AHG’s Scheme Claims. The amount is paid to compensate AHG for their involvement in  negotiating the terms of the Restructuring for over 20 months, conducting extensive due diligence on over 130 Group entities, reviewing over 1,000 pages of documentation, and trading restrictions due to receipt of material non-public information for 4 months.

(2)  CoCom Work Fee: CoCom receives USD10 million cash and 235,485,404 shares in the Company, totalling USD27.51 million.[40]  This represents 1.55% of CoCom’s Scheme Claims, and is paid to compensate them for engaging in similar work as AHG.

(3)  CB Holder Group Work Fee: CB Holder Group receives 54,736,364 shares in the Company worth USD4.07 million,[41] which represents 1.34% of their Scheme Claims, as compensation for their involvement in similar work.

D4.  Third-party releases

27.The Scheme contains clauses to release (i) third party obligors which had provided guarantees and security under ICA Credit Support package and SSA Credit Support package; and (ii) any claims which the Company or the Scheme Creditors may have against various third parties in relation to the Restructuring and Scheme:

(1)  As regards third party obligors, they are 9 offshore subsidiaries that provided guarantees and security under ICA Credit Support package and 11 offshore subsidiaries that provided guarantees and security under SSA Credit Support package[42]. These releases are critical because without them, Scheme Creditors could pursue claims against the relevant subsidiaries (qua guarantors and security providers), which would then have recourse against the Company for contribution or indemnification, effectively undermining the entire restructuring through “ricochet claims”[43] (Re Times China Holdings Ltd [2025] HKCFI 3937 §22).

(2)  As for Restructuring/Scheme related claims, these are claims against third parties involved in facilitating, negotiating and preparing the Restructuring viz., (i) Company’s advisers, Linklaters and Houlihan Lokey, (ii) the advisers to creditor groups including PJT Partners and Kirkland & Ellis for AHG, and Allen Overy Shearman Sterling and Deloitte for CoCom, (iii) the Company’s directors, (iv) the Information Agent, (v) the Chairperson of the Scheme Meetings, (vi) AHG and CoCom, and (vii) various administrative parties. These releases cover actions taken, omissions, or circumstances occurring prior to RED relating to the Existing Debts, as well as the negotiation, preparation, execution, sanction, and implementation of the Scheme[44] (Times China §22).

(3)  Qualified releases in respect of the directors are needed as it is not clear if the Directors and Officers’ liability insurance covers any liability incurred in relation to the Restructuring/Scheme[45].

(4)  The above releases are subject to carve‑outs designed to preserve onshore rights; post‑Scheme rights; payment of contractual fees/costs; breach of director’s duty outside restructuring context; breach adviser’s duty of care; fraud, gross negligence, wilful misconduct, wilful default; claims not arising from Existing Debts/Scheme/Restructuring; and survival of administrative rights.[46]  The carve-out relating to directors tracks the language approved in Re Yuzhou Group Holdings Co Ltd [2025] 1 HKLRD 69 §17.

D5.  Restructuring Conditions

28.The Scheme Consideration Entitlement is only payable upon the occurrence of RED which, in turn, is subject to the Restructuring Conditions having been satisfied or waived.

29.RED is subject to a Longstop Date of 31 March 2026, which may only be extended with the consent of “Majority Scheme Creditors” (holding more than 75% in value) who have voted by any deadline set in respect of that consent, but may not be extended beyond 30 September 2026[47].

30.At the time of the Sanction Hearing, the Restructuring Conditions have either been compiled or will shortly be complied with[48]. The more significant ones are:

(1)  Approval of Existing HKD Convertible Bonds Solicitation: this has been obtained on 5 November 2025;

(2)  Recognition of the Scheme under Chapter 15 of US Bankruptcy Code: the Company filed application for recognition on 1 October 2025 and obtained recognition on 2 December 2025 (see §55 below);

(3)  Payment of Work Fees: the Company has sufficient liquidity to pay the cash portion of the Work Fees prior to RED;

(4)  Payment of all professional fees, costs and expenses incurred in relation to the Restructuring: the Company has been monitoring these costs and will pay the amounts due before RED;

(5)  Approval and authorisations for issuance of the New Instruments and new shares under the Restructuring: shareholders at the EGM held on 3 December 2025 passed resolutions approving the issues. The Company submitted its application to NDRC on 22 October 2025, and expects to obtain a legal memorandum from its legal advisers in the Mainland on the eligibility to issue the New Instruments before RED;

(6)  Conversion of shareholders loans into equity: The Controlling Shareholder and the Company entered into the Shareholder Loans Equitisation Agreement on 13 November 2025; and

(7)  Appointment of Monitoring Accountant by the Company: the Company expects to complete the engagement well in advance of RED.

D6.  Modification clause

31.Clause 13.1.1 is a conventional modification clause which allows the Company to consent to modifications of terms at any Sanction Hearing on behalf of all Scheme Creditors. Such changes is necessary for implementing the Restructuring and does not have a material adverse effect on the interests of any Scheme Creditor (Re Cine-UK Ltd [2024] Bus LR 1944 §55).

32.Clause 13.1.2 provides that if any Scheme Creditor becomes a Sanctioned Scheme Creditor, the Company is empowered to amend the Scheme and the Restructuring / New Instrument Documents as reasonably necessary so that (a) the Sanctioned Scheme Creditor is treated fairly in relation to its Scheme consideration, and (b) the Scheme and related documents remain fully compliant with Applicable Sanctions, with the administrative parties authorised to implement those amendments on the Company’s written notice.

33.Clause 13.2 provides that no waiver proposed by the Company of any provision of the Scheme shall be effective unless: (1) it has the prior written consent of the Majority Scheme Creditors (holding more than 75% in value) who have voted by any deadline set in respect of that consent; and (2) to the extent that the beneficiary of the provision being waived is not a Scheme Creditor, it has the prior written consent of that person or entity.

E.  DISCUSSION

34.It is well-established that the function of the court at the hearing of a petition to sanction a scheme is to consider:

(1)  whether the scheme is for a permissible purpose;

(2)  whether creditors who were called on to vote as a single class had sufficiently similar legal rights that they could consult together with a view to their common interest at a single meeting;

(3)  whether the meeting was duly convened in accordance with the court’s directions;

(4)  whether creditors have been given sufficient information about the scheme to enable them to make an informed decision whether or not to support it;

(5)  whether the necessary statutory majorities have been obtained;

(6)  whether the court is satisfied in the exercise of its discretion that an intelligent and honest man acting in accordance with his interests as a member of the class within which he voted might reasonably approve the scheme; and

(7)  if the company which puts forward the scheme is a foreign company, whether there is sufficient connection between the scheme and Hong Kong, and the utility of the court sanctioning the scheme” (Times China §31).

35.Each of the above criteria is satisfied.

E1.  Permissible purpose, court directions and statutory majorities

36.The purpose of the Scheme is to reduce the Company’s offshore debts by more than USD10 billion; reduce the servicing costs of the remaining debts and extend the maturity dates of the Existing Debts to 2027–2036. This is a permissible purpose of a scheme.

37.The Company has complied with the Convening Order[49] including the directions for service of the Scheme Document.

38.The necessary statutory majorities having been obtained in that the resolution to approve the Scheme was approved by both classes of Scheme Creditors present and voting, either in person or by proxy[50]:

(1)  Scheme Creditors (Class 1): 33 creditors holding USD3,432,639,045 (representing 83.71% in value) voted in favour. 8 creditors holding USD668,195,727 (representing 16.29% in value) voted against.

(2)  Scheme Creditors (Class 2): 2,364 creditors holding USD10,781,327,145 (representing 96.03% in value) voted in favour. 20 creditors holding USD446,197,854 (representing 3.97% in value) voted against.

E2.  Class composition

39.In considering the issue of class, the question is whether the rights (as opposed to commercial or other interests) of the Scheme Creditors before and after the Scheme are so dissimilar that they cannot form a single class. The court would adopt a broad approach and avoid giving unjustified veto rights to minority creditors (Times China §35).

40.In the present case, it is appropriate for Scheme Creditors to be placed in 2 classes in view of the difference in their rights under the Scheme[51]:

(1)  Class 1 comprises lenders of Existing Syndicated Loans. These Scheme Creditors need to be put in a separate class because, while they have the same rights against the Company before the Scheme, only they will have the right to receive SCA totalling USD178 million as part of the arrangements agreed for supporting the Scheme[52].

(2)  Class 2 are essentially unsecured creditors of the Company. While Existing Public Notes, Existing HKD Convertible Bonds, Ever Credit Bilateral Loan and ICBC Loan all benefit from the same package of security interests granted by the Company, these security interests are of little value[53].

(3)  As for lenders under Existing Loans (Onshore Credit Support), they also benefit from additional third-party credit support, comprising inter alia guarantees given by onshore subsidiaries and security interests over onshore assets. However, these rights against third parties are not relevant to the determination of rights against the Company (Re Yuzhou §26).

41.The RSA Fees do not fracture the classes as they only represent 0.05%-0.10% of outstanding principal which are immaterial as compared to the recovery under the Scheme (17.8% to 54.0%). All Scheme Creditors had opportunity to accede to RSA by their respective deadlines, with Class 1’s longer deadline justified by the practical limitations of bank internal approval processes[54] (Times China §42).

42.Mr Maurellet submits that the Work Fees are compensatory and payable regardless of whether the Scheme will be sanctioned. However, the fact remains that payment of the Work Fees is one of the Restructuring Conditions for RED to take place and, therefore, cannot be said to be independent of the Scheme.

43.I do not think the Work Fees fracture the classes for the following reasons[55]:

(1)  They are compensatory in nature for 20 months of intensive work undertaken by the relevant creditors group. In the case of AHG, to compensate them for not being able to trade in the notes due to the receipt of material non-public information.

(2)  The Work Fees, of which over 60% are paid by way of shares in the Company (including MCB), represent 0.51% (AHG), 0.76% (CoCom) and 0.04% (CB Holder Group)[56] of the outstanding principal, are in line with comparable restructurings.

(3)  In terms of additional recovery, the Work Fees increase the recovery for AHG by less than 1.73%, for CoCom by less than 1.55%, and for CB Holder Group by less than 1.34%. These amounts, as compared to the recovery under the Scheme (from 17.8% to 54.0%), are not so material as would induce the relevant creditors group to vote for the Scheme which they would not otherwise have supported (Times China §§40-41).

44.The waiver of interest does not create a class issue as all Existing Debts are entitled to charge interest, and all interest accrued on the Existing Debts during the period from 1 October 2024 to the Record Date (31 October 2025) will not be counted for the purpose of calculating Scheme Consideration Entitlement. There is no difference in treatment between Scheme Creditors.

E3.  Information provided to Scheme Creditors

45.The Explanatory Statement (and the Supplement thereto) included additional information, explanations and clarifications on various matters identified by this Court at the Convening Hearing and discussed above.

E1.  Amendments post-Convening Hearing

46.Mr Maurellet draws to the court’s attention that various amendments were made to the draft Explanatory Statement after the Convening Hearing and before it was despatched to Scheme Creditors on 14 October 2025. The amendments reflect the finalised commercial terms of the Restructuring, the Scheme, CGPV Acquisition, CVR, and the New Instruments agreed between the Company, AHG and CoCom after the Convening Hearing to safeguard the interests of Scheme Creditors.[57] The amendments include:

(1)  Expansion of events of default across the New Instruments: Events of default now include failure by the Controlling Shareholder to enter into or perform the Scheme Creditor CVR Deed and Listco CVR Deed after CGPV Acquisition, and any default or denial by the Company of its obligations under the Deed of Undertaking and Subordination, ICL Assignment Deed or ICL Subordination Deed.

(2)  Alignment of amendment mechanics across New Instruments: Amendments to ICL Subordination Deed, Deed of Undertaking and Subordination, and the Scheme Creditor CVR Deed must now follow the same procedures as the New Notes indentures and security documents. Amendments to a New Notes series must be offered on equal terms to the corresponding New Loan (and vice versa), and changes to MCB (A) or (B) conversion features require 75% holder approval.

(3)  Pro rata redemption: Redemptions of New Instruments using cash sweep proceeds must be made pro rata across all series by reference to their initial amounts at RED. The same applies to optional redemptions of LTN (A)/(B) and LTL (A)/(B) after full repayment of MTN and MTL.

(4)  Equal treatment of Scheme Creditors holding New Notes and New Loans in public offer or repurchase: Any public offer or repurchase of a series of New Notes must be matched by a proportionate offer or repurchase of the corresponding New Loan on the same terms (and vice versa), ensuring parity between “note form” and “loan form” of the same series.

(5)  Priority of certain cash sweep assets to reflect SCA Loan precedence: A defined pool of offshore cash sweep assets is earmarked and the proceeds will be applied to repay SCA Loan first until it is repaid in full.

(6)  Periodic disposals and increased transparency: Cash sweep balances above agreed thresholds must be applied to prepayment within 45 Business Days (USD50 million / USD20 million generally, and USD5 million where SCA Loan has priority). For larger disposals, an internationally recognised expert valuation (subject to an objective price discovery carve-out) is required to support transparency and value protection.

(7)  Alignment of representations and warranties across New Notes and New Loans: New Notes indentures and New Loan facilities are aligned by adding consistent representations and warranties on compliance with sanctions and anti-bribery and corruption laws.

(8)  Protections in the form of future security: Where credit-enhancing assets are disposed of, part of the Offshore Annual Budget Withholding is reserved for interest and the balance may be reinvested. If invested in new offshore projects, the Company must pledge the holding company shares and procure guarantees of the New Instruments, preserving creditor benefit while allowing reinvestment.

(9)  Loan acceleration: The threshold for accelerating New Loans has been reduced from more than 75% (Super Majority) to more than 66⅔% (Specified Majority), making acceleration easier to achieve.

(10)  Fair allocation of payments received under CVR: Scheme Creditor CVR Deed payments received by the trustee or facility agent are to be shared pro rata among Noteholders or Lenders, and the same do not reduce principal or interest, reflecting pure upside. Recoveries under Deed of Undertaking and Subordination are applied to early pro rata redemptions or lender distributions, promoting creditor equality and clarifying they are separate from ordinary debt service.

47.On 5 November 2025 (prior to the Scheme Meetings), the Company circulated to Scheme Creditors (at CoCom’s solicitors’ request) a further set of minor clarificatory amendments to the form documents[58], to inform them that any default by the Company under Deed of Undertaking and Subordination, or by the Controlling Shareholder under Scheme Creditor CVR, will also be an event of default under the New Instruments. The changes were made for the purposes of accurately reflecting the identity of the obligors and do not substantially alter the Explanatory Statement[59].

E2.  Exclusion of TF Loan from Scheme

48.At the Convening Hearing, Tai Fung as lender[60] of one of the Existing Loans (Onshore Credit Support) opposed the inclusion of the TF Loan in the Scheme due to concerns relating to its rights over its onshore credit support post-Restructuring.

49.Following the Convening Hearing, the Company and its advisers continued to engage with Tai Fung and its advisers to address its concerns. In particular, the Company engaged Professor Shi Jingxia to provide an independent expert opinion on relevant issues of PRC law (“Opinion”). The Opinion states, among others, that:

(1)  Tai Fung’s rights in respect of its onshore credit support would remain valid and enforceable in the Mainland after implementation of the Restructuring; and

(2)  The Mainland courts would recognise the effectiveness of bilateral and/or unilateral side letters issued by the onshore credit support providers in preserving Tai Fung’s rights in respect of its onshore credit support post-Restructuring.

50.On 29 October 2025, the Company and Tai Fung executed a Standstill Deed whereby the parties agreed, inter alia, that[61]:

(1)  The Company shall exclude TF Loan from the Scheme;

(2)  Tai Fung shall not take any enforcement action against the Company in Hong Kong until 31 December 2030 (“Standstill Period”);

(3)  During the Standstill Period, Tai Fung may join the Company as a co-defendant in its enforcement actions in the Mainland, but only to obtain a monetary judgment and/or declaratory relief for amounts outstanding under TF Loan, but may not take any steps to enforce such judgment in Hong Kong;

(4)  Tai Fung and relevant onshore obligors who have provided onshore credit support to TF Loan shall enter into supplemental security agreements within 20 Business Days following the date of execution of the Standstill Deed, under which the onshore obligors undertake to continue to perform their obligations under the onshore credit support notwithstanding the Restructuring; and

(5)  The Standstill Deed includes provisions for confirmation of outstanding principal and set-off arrangements in respect of funds held by a Group subsidiary with Tai Fung.

51.After executing the Standstill Deed, on the same day (29 October 2025), the Company issued the Supplement to the Explanatory Statement to update Scheme Creditors on this development[62]. The Supplement included Kroll’s addendum to the Liquidation Analysis and Recovery Analysis, which concludes that the exclusion of TF Loan results in all Scheme Creditors receiving better recoveries under the Scheme than under the Comparator Scenario.

52.While Tai Fung may pursue direct action against the Company in the Mainland courts, the Company has no assets in the Mainland which may be subject to enforcement. As Tai Fung is precluded from enforcing any judgment obtained in the Mainland against the Company in Hong Kong, the Scheme will not be jeopardised or affected[63].

53.The above information, together with the information about the background to the Company and the Restructuring, explanation on the Scheme terms, risk factors and recovery analyses in liquidation scenario and under the Scheme, provided sufficient information for the Scheme Creditors to decide whether or not to vote for the Scheme.

F.  DISCRETIONARY FACTORS

F1.  International dimension and utility

54.The Company has sufficient connection with Hong Kong for scheme purposes and there is utility in the court granting sanction of the Scheme[64] for the following reasons:

(1)  It has since 8 February 2007 been registered in Hong Kong as a non-Hong Kong company;

(2)  The Company’s shares have since 20 April 2007 been listed on HKEx;

(3)  The Scheme has been negotiated primarily in Hong Kong with Hong Kong-based advisers over 20 months;

(4)  A significant portion of the Scheme Claims is governed by Hong Kong law; and

(5)  Amongst the 2,425 Scheme Creditors attended and voted (in person or by proxy) at the Scheme Meetings, 2,384 of which are under Class 2 and their debts are governed by either New York law or English law. By attending and voting at the Scheme Meeting, these Scheme Creditors have submitted to the jurisdiction of the Hong Kong court.

55.As approximately 64.5% of Existing Debts[65] arose out of New York law governed notes, the Company has applied to New York Bankruptcy Court on 1 October 2025 for recognition of the Scheme under Chapter 15 of the US Bankruptcy Code. At the substantive hearing on 2 December 2025, Justice Bentley granted recognition of the Scheme, the subject matter of these proceedings (if sanctioned), as “foreign main proceedings” on the basis that the Company’s COMI is in Hong Kong.

56.The Company does not intend to have a parallel scheme in the Cayman Islands for the following reasons:

(1)  The Cayman court will recognise the effectiveness of the Scheme to compromise those Existing Debts which are governed by Hong Kong law;

(2)  The Scheme Creditors whose claims are governed by New York law will be bound by the Scheme as the Scheme has been recognised as “foreign main proceedings” by the New York Bankruptcy Court;

(3)  Although there are 12 PRC law governed onshore facilities compromised under the Scheme, they only account for about 3% of the Existing Debts, and the Company does not directly hold any assets against which enforcement action can be taken by the relevant lenders in the Mainland.

F2.  Intelligent and honest man test

57.The court would be slow to differ from the majorities’ view as businessmen are much better placed than the court in assessing what is commercially advantageous to them (Times China §44).

58.In the present case, the Scheme is the product of a long-drawn negotiations process with the active involvement and participation of  members of 3 creditors groups. The Scheme is one which an intelligent and honest man might approve, which is borne out by the number and value of the votes cast at the Scheme Meetings.

Mr Jose Maurellet SC leading Mr Look Chan Ho, instructed by Linklaters, for the Company