Tue 11/01/2022 20:00 PM
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In this column, Reorg editors and reporters take turns writing about trends in high yield, distressed debt, restructuring and bankruptcy in major Asian markets including China, Southeast Asia, India and Australia. Any opinions or other views expressed in this column are the author's own and do not necessarily reflect the opinion or views of Reorg or its owners. Send your people and fund news to asiaeditorial@reorg.com.

Hong Kong Airlines was once memorably told to improve its standard operating procedures after two of its pilots attempted to take off from the taxi lane at Hong Kong’s Chek Lap Kok airport, in a Boeing plane containing 122 passengers and seven crew members.

Fourteen years on, and the long financially troubled carrier is now in the process of preparing to launch itself again, through a combined UK restructuring to run parallel with a Hong Kong scheme of arrangement. At the same moment in history, Hong Kong is attempting to relaunch itself as a post-Covid global financial hub, though it increasingly looks like the city’s initial attempt is stuck in the taxi lane.

As I write, Hong Kong’s showcase reopening via a global banking summit, (even Google doesn’t seem to know the actual name of the event, which is perhaps a problem), is rapidly losing headline bankers. The event also faces a potential hammer blow from the weather gods, in the form of severe tropical storm Nalgae, which could shutter the summit for one of its three days.

And yet in an odd symmetry, HonAir could ultimately become Hong Kong’s number one carrier (as and when the city does finally rip off its mask, throw away its RAT and PCR tests, and fully open for international tourists).

For anyone familiar with the HonAir story, that might seem rather like a Dodo emerging as a Phoenix from the smoldering detritus of a dumpster fire, but we live in strange times.

As recently as 2019, 11 years after the taxi take-off incident, then HNA affiliate HonAir was Hong Kong’s number three carrier, behind number two Dragonair, and long-standing number one, Cathay Pacific Airways Ltd.

HonAir was in financial trouble long before Covid roiled the airline industry. A 2019 boardroom dispute over control of shares in its parent company had ended up in the Hong Kong High Court.

In December of the same year, the Hong Kong Air Transport Licensing Authority demanded that the carrier immediately improve its cash position or face revocation or suspension of its license. Alafco Irish Aircraft Leasing Sixteen Ltd. was sueing for outstanding judgment debt of $35.6 million. The situation deteriorated throughout 2020, with deferrals on distributions on $683 million 7.125% perpetual securities, and an uncured breach of covenants under terms and conditions of the securities, as the issuer was unable to provide financial statements.

But in 2020, Dragonair fell victim to Covid, and its 35-year run as a carrier came to an end. Cathay Pacific announced its own restructuring in October 2020, following a HKD 39 billion ($5.03 billion) recapitalization involving the sale of HKD 19.5 billion in preference shares and warrants to Aviation 2020 Ltd., and a HKD 7.8 billion bridge loan provided by the same entity, which is wholly owned by the Financial Secretary Incorporated of Hong Kong.

Flagship carrier Cathay had already landed itself in the middle of anti-government protests in Hong Kong in 2019, when the support of one of its trade unions for protestors and numbers of its staff being involved in demonstrations led to China’s tabloids targeting the airline, and the Civil Aviation Administration of China threatening to lock the carrier out of China’s air space. Heads rolled at Cathay, and the company performed a rapid about-turn from its liberal position on employees’ extracurricular activities.

That memory is not yet distant in Beijing.

Certainly holders of $683 million perpetual notes facing a potential cross-class cram down believe there is more value locked up in HonAir than the 5% recovery offered under restructuring terms, and an ad hoc group of holders filed their challenge to the proposed restructuring and scheme, as Reorg reported on Oct. 26.

While the liquidation analysis is a fundamental point of contention for the AHG, part of the belief in future value of the business also lies in its expected financial support of Liaoning Fangda. The Chinese conglomerate which took control of HNA’s core aviation business segment, HNA Aviation, in late 2021 as part of HNA’s bankruptcy reorganization will take indirect control of HonAir after a HKD 3 billion equity injection, according to plan documents. Cathay Pacific’s tarnished image is also seen creating an opportunity for HonAir when Hong Kong and China do finally reopen for travel.

The challenge from the perps and two lessors means the U.K. leg of the process may finally provide a ruling from an English court on whether a Part 26A restructuring plan constitutes an insolvency related event for the purposes of determining whether Article XI of the Cape Town Convention applies. If the protocol applies, it would permit recovery of aircraft by relevant lessors notwithstanding the terms of the restructuring plan, as Reorg has reported.

It would have been impossible to imagine HonAir rising to ascendancy as a Hong Kong carrier as recently as 2019.

It’s perhaps appropriate that it might create legal precedent on its return.

Reorg’s coverage of Hong Kong Airlines is HERE. Coverage of HNA is HERE. Coverage of Cathay Pacific is HERE.

–Stephen Aldred, Managing Editor, Asia

From Our Financial & Legal Analysts
Below are links to recent reports written by our financial and legal analysts:

Road King Infrastructure

Reorg’s tear sheet on Chinese real estate developer and toll road operator Road King Infrastructure highlights cash requirements at 75% toll road subsidiary Road King Expressway which include the proposed acquisition of an Indonesian expressway and capex spend in relation to prospective toll road concession renewals. The analysis further highlights that any partial stake sale of Road King Expressway may be caught under the offshore notes' asset sale provision but there may be structuring solutions around this.

Hilong Holdings

Reorg’s tear sheet on Chinese integrated oilfield equipment and services provider Hilong Holding highlights the company’s continued high working capital intensity in 1H22, despite upstream customers enjoying a strong oil market. The company’s short-term liquidity is likely sufficient if it can convert the strong 1H22 topline and earnings into positive OCF generation in 2H22. Drilling pipe sales, which is almost half of Hilong’s revenue, is likely to do well in 2H22 if the upbeat guidance from an international peer broadly applies.

Bankruptcy Industry Update

Reorg analyzes the written judgment from Bermuda’s Court of Appeal (CoA) in connection with the eventual winding up of NewOcean Energy Holdings Limited by HSBC. The judgment provides market participants with further guidance around the ability of a creditor to liquidate a defaulted company, despite attempts by a company to adjourn such action on the basis of a proposed restructuring, among other legal issues.

Reorg Asia Watchlist



Asia Pacific Healthcare Investments (China Resources Holding) has provided 42.8 million Australian dollars ($27 million) as a shareholder loan to global oncology services provider GenesisCare, sources told Reorg. The funds, which total less than half the AUD 88 million that GenesisCare had asked the Chinese fund to provide, were drawn as of last week, sources added.

Reorg’s coverage of GenesisCare is HERE.


Australian energy infrastructure company APA Group (ASX: APA) announced on Oct. 18 that it had entered into a Deed of Company Arrangement (DOCA) in relation to the acquisition of Basslink Pty Ltd. and its only subsidiary Basslink Telecoms Pty Ltd. This follows the second creditors’ meeting at which creditors voted to approve the DOCA approved by APA.

Reorg’s coverage of Basslink is HERE.

Coronado Global Resources

Coronado Global Resources Inc. (ASX:CRN) announced Oct. 12 that it is in confidential discussions with Peabody Energy Corporation (NYSE:BTU) regarding a potential combination transaction. Coronado said no deal has been agreed and the discussions are ongoing, and as such it is not in a position to provide further details.

Reorg’s coverage of Coronado is HERE.


New Coverage: Road King Infrastructure

This real estate developer and toll road builder differs from its real estate developer peers thanks to its toll road operations in China and Indonesia, which diversifies its business profile and helps to mitigate uncertainties in its real estate operations. Reorg took an in-depth look at the company’s organization chart, business and financial overview.

Read Reorg’s coverage of Road King HERE.

Gemdale Group

This Chinese real estate company saw its onshore and offshore bonds drop across the curve recently due to rumors about its overdue non-standard debt and possible senior management changes. Gemdale management told investors in private conversations that Gemdale doesn’t have any overdue non-standard debt, and nor does it expect any management change. After the conversations, Gemdale bonds began rebounding across the curve.

Read Reorg’s coverage of Gemdale HERE.

Fosun International

This Shanghai-based conglomerate plans to sell an equity interest in Tianjin Dragon, an iron ore trading business, as part of its attempts to divest non-core assets and increase its cash reserves.

Read Reorg’s coverage of Fosun HERE.

Longfor Group

On a call with investors, management said that Longfor has prepared sufficient funds for redeeming early its $300M due April 2023 notes, and that it may launch a tender offer for the notes. Early redemption will help alleviate Longfor’s debt repayment pressure next year. Management also detailed the company’s plans for repaying early offshore syndicated loans maturing in H1’23.

Read Reorg’s coverage of Longfor HERE.

Country Garden

On a call with inventors, management of Country Garden said the company planned a second medium-note issuance in November with guarantee from China Bond Insurance Co., and that Country Garden is in discussion with lenders of a $440 million offshore syndicated loan due December about refinancing the loan.

Read Reorg’s coverage of Country Garden HERE.

Seazen Group

Confirming a prior report from Reorg, Seazen has proposed to issue up to RMB 1.5B three-year MTN due 2025 that will be 100% guaranteed by China Bond Insurance Co., according to a term sheet seen by Reorg.

Read Reorg’s coverage of Seazen Group HERE.

Agile Group

This real estate developer has told certain investors that it has arranged funds for the redemption of its RMB 1.5B onshore bond due Oct. 19. Additional payment obligations in October include RMB 950M ABS putable Oct. 28. Agile confirmed the onshore bond redemption in a filing a few days later.

Read Reorg’s coverage of Agile Group HERE.


Continuum Green Energy Ltd

Morgan Stanley Infrastructure Partners-backed Indian renewable energy group Continuum Green Energy Ltd’s corporate finance head, Nisheeth Khare said, during an investor call on Oct. 28, that the company had launched a shareholder exit process at the beginning of October. Deutsche Bank and Citibank have been appointed as bankers for the sale process. The sale process is expected to conclude in nine to 12 months, and the new investors will bring in growth capital.

Read Reorg’s coverage on Continuum Green Energy HERE.

Jaypee Infratech

National Asset Reconstruction Company Ltd.’s INR 35.7 billion ($433.8 million) bid for INR 92.34 billion non-performing loans of Jaypee Infratech is expected to win the Swiss challenge auction due to a lack of counter bids.

Read Reorg’s coverage on Jaypee Infratech HERE.

Vedanta Ltd.

Vedanta Resources Ltd. has reduced its debt by $1.4 billion - to $8.3 billion from $9.7 billion - in the first half of the fiscal year ended Sept. 30, Ajay Goel, acting group CFO of Vedanta said during Vedanta Ltd.’s earnings call on Oct. 28. Vedanta Resources’ total liabilities for the period were around $3 billion, including loans, bonds, interest, and costs, he added. The company used $1.6 billion from dividends and $200 million from brand fees to repay maturities in the first half of the current fiscal year, and the remaining $1.3 billion was refinanced, Goel said.

Read Reorg’s coverage on Vedanta Ltd. HERE.

Srei Infrastructure Finance

National Asset Reconstruction Company Ltd. (NARCL), or India’s bad bank, submitted an expression of interest (EoI) to participate in the corporate insolvency resolution process (CIRP) and submit resolution plans for Srei Infrastructure Finance and its wholly-owned subsidiary Srei Equipment Finance.

Read Reorg’s coverage on Srei Infrastructure Finance HERE.



Singapore-based global logistics company GLP Pte. Ltd. has told certain investors that it plans to use some of the around $2 billion cash on its balance sheet to buy back some of its bonds, according to three sources familiar with the situation.

Read Reorg’s coverage of GLP Pte HERE.

Medco Energi

Indonesian oil and gas company PT Medco Energi Internasional Tbk announced on Oct. 26 that it expects to accept for purchase $255.1 million in aggregate principal amount of its 6.75% senior notes due 2025, but will make no purchase of the 7.375% senior notes due 2026 or 6.375% senior notes due 2027 that had been validly tendered and not validly withdrawn by the early tender offer deadline on Oct. 24, New York time.

Read Reorg’s coverage of Medco International HERE.

Bumi Resources

PT Bumi Resources Tbk announced Oct. 19 that its $1.6 billion non-preemptive share issue without rights has been successfully implemented, its remaining PKPU debt obligation has been entirely met and the cash settlement amount has already been remitted. Bakrie Group and Salim Group are now joint controlling shareholders of the company.

Read Reorg’s coverage of Bumi Resources HERE.

Alam Sutera Realty

Indonesia property developer PT Alam Sutera Realty Tbk announced on Oct. 20 that a total of $139.07 million in principal amount of its $171.4 million 8% senior secured notes (SSNs) due May 2024 (SSNs), representing 81.14% of the total outstanding principal, had been validly tendered (and not withdrawn) by the expiration date of the tender offer and consent solicitation at 4 p.m on Oct. 19 (London Time).

Read Reorg’s coverage of Alam Sutera Realty HERE.

Garuda Indonesia

The Indonesia Stock Exchange (IDX) will consider lifting the trading suspension on PT Garuda Indonesia’s securities after the Indonesian flag carrier issues new notes for its restructured $500 million global sukuk as part of the homologation plan.

Read Reorg’s coverage of Garuda Indonesia HERE.

Fundraising & People Moves

KKR, a leading global investment firm, and global sovereign investor Mubadala Investment announced on Oct. 24 the signing of a strategic partnership under which the two firms will co-invest across performing private credit opportunities in the Asia Pacific (APAC) region. The partnership aims to deploy at least $1 billion of long-term capital, providing bespoke credit solutions to companies and sponsors. Mubadala will deploy its capital alongside KKR’s existing pools of capital, including the recently raised KKR Asia Credit Opportunities Fund, a $1.1 billion vehicle focused on performing, privately originated credit investments in the region, the announcement states.

Carlyle Group Inc. said in a statement on Oct. 24 that it has hired Geoff Hutchinson as managing director and head of private equity for Australia and New Zealand. Hutchinson joins from New Zealand infrastructure investor Morrison & Co, where he was co-head for Australia and New Zealand, the firm said in a statement Monday. Previously he was a managing director at Pacific Equity Partners, where he worked between 2008 and 2021.

Indonesian law firm Hiswara Bunjamin & Tandjung has hired disputes partner Prawidha Murti (Wida) as part of its continued expansion in Indonesia and Asia, alongside associate firm Herbert Smith Freehills. Wida has over 20 years' experience in complex dispute resolution involving international and domestic clients and interests in Indonesia, including local litigation, arbitration, regulatory and compliance investigations, and contentious competition and employment matters. She advises international as well as domestic clients from a wide range of sectors, including private wealth, energy, infrastructure, projects and construction, technology, media and telecommunications, finance, mining and resources, and aviation, the announcement states.

Morgan, Lewis & Bockius LLP has added an eight-lawyer EMEA and Asia Pacific aviation team, including three partners - Sidanth Rajagopal, James Bradley and Manuela Krach - across the firm’s London, Dubai and Singapore offices. In addition to the partners, two counsel - Sourabh Bhattacharya and Terry Chang - and three associates - Atif Ayub, Kevin Pearson, and Jie Hao (Ivan) Qiu - are joining the firm. They focus on transactional, leasing, and restructuring, with their experience extending into project development work, especially in the airports sector.

FTI Consulting announced in an emailed press release the appointment of Alex Wong as a Managing Director and Asia Head of Structured Solutions within the firm’s Corporate Finance & Restructuring segment in Hong Kong. Wong has 20 years of M&A and financing experience in bulge bracket investment banks, as well as hands-on senior corporate strategy and executive management experience. At FTI Consulting, he will focus on regional and cross-border M&A advisory and capital raising with a sector focus on Telecom, Media & Technology (“TMT”), FinTech/Web3, financial institutions and real estate. His appointment will complement the firm’s Capital Solutions offering in Asia, which assists and provides solutions to corporates to enable opportunities such as acquisitions, refinancings and dividend recapitalisations, the announcement states.

Week Ahead
Below is a list of events on the Reorg Asia Calendar for the next two weeks:
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