Asia bi-weekly: Liability Management Exercise 2.0 (June 15 – June 28)
Mon Jun 27, 2022 12:40 pm Financial Restructuring

In a scoop we published last week, certain holders of Zhenro Properties’ offshore notes have formed an ad hoc group, which has had initial contact with the issuer and is in discussions with potential advisors.

The formation of the ad hoc group came less than three months after Zhenro completed an exchange offer and consent solicitation for five due 2022 notes. In fact, a mere two months after completion of the exchange offer, Zhenro said it would not pay a $13.7 million coupon on its $300 million 9.15% notes due May 2023 within a 30-day grace period, and that the nonpayment would trigger a cross default on 13 series of the company’s offshore notes. Reorg’s tear sheet analysis of Zhenro can be accessed HERE.

The sequence of events has made expert comments on an April 19 Reorg webinar about liability management exercises, or LMEs, seem prescient, as detailed in a prior column. The hasty manner in which the initial exchange offer was launched led one to wonder whether comprehensive efforts had been made to identify the problem first and then come up with potential solutions, according to experts who spoke on the webinar. Fact patterns of many of those LME 1.0’s did raise the question of whether they were long-term solutions or simply Band-Aids.

In another LME 2.0, R&F Properties launched a consent solicitation on June 17 to extend the 2022, 2023 and 2024 maturities of its 10 offshore notes for between three to four years by consolidating the notes into three groups. The proposal includes an asset sale redemption undertaking involving ONE Nine Elms project in London and 60% net consideration from the sale of the R&F Princess Cove project in Malaysia.

As a backup plan to the consent solicitation, R&F said it will launch a scheme of arrangement, and that the RSA will consolidate all 10 series of notes into one single six-year note. Company management told investors on calls that should the consent solicitation fail and the company go with the scheme of arrangement, the terms of the new RSA would be worse than what was proposed now.

Displeased with the proposal, bondholders of R&F are seeking to potentially organize and have been in discussions with Houlihan Lokey and Ropes & Gray, among others. The discussions were at an early stage.

Smarting from LME 1.0’s, will investors be wiser this time around?

–Shasha Dai, Managing Editor – China

From Reorg Asia’s Managing Editors
In this column, managing editors Stephen Aldred and Shasha Dai 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. To request trial access to Reorg for you and your team, click here.

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