CFLD Sounds Out Preliminary Debt Settlement Plan for All Onshore Outstanding Bonds; Potential Principal Extension of Three to Five Years With No Upfront Payment; Co. to Begin Negotiating With Bondholders in Coming Weeks

China Fortune Land Development, or CFLD, has sounded out to certain bondholders a preliminary debt settlement plan for all its outstanding onshore bonds. Now that the Chinese New Year holiday is over, the industrial park and property developer plans to begin negotiating with holders over the coming weeks, according to two bondholder sources familiar with the matter. Continue reading for our Asia Core Credit team's analysis of China Fortune Land Development (CFLD)'s preliminary debt settlement plan for its outstanding onshore bonds and request a trial for access to our coverage of thousands of other stressed/distressed debt situations in the region. 

The plan that CFLD has floated includes potentially extending principal payment by three to five years with no upfront cash payment or credit enhancement, the sources said. The plan is preliminary and subject to change based on negotiations with bondholders, the sources noted.

Some bondholders expressed concern about the long principal extension period without upfront payment or credit enhancement such as guarantee. They were also concerned about a lack of asset disposal plans.

Meanwhile, holders of several onshore bonds are scheduled to meet this month in the wake of CFLD’s disclosure that it has RMB 5.255 billion overdue debt, which will trigger cross default of several bonds if the missed payments are not cured within a grace period.

For a Feb. 26 holder meeting for RMB 1.8 billion 5.8% medium-term notes due May 23, 2022, “17 CFLD MTN001,” five mutually exclusive proposals have been submitted including 1) unconditional waiver of cross default; 2) adding a put option; 3) waiver of cross default on the condition that CFLD provides guarantee; 4) waiver of cross default on the condition that the coupon rate is increased by 50bps; 5) waiver of cross default on the condition that the company does not issue new bonds, according to one of the bondholder sources and a third source familiar with the matter.

CITIC Securities, an underwriter of the company’s next onshore maturity, RMB 1.999 billion 7% corporate bond due March 3 “16 CFLD 02,” will convene a holder meeting on Feb. 25 to discuss repayment plans with the exact agenda to be determined, said the first source and a fourth bondholder source familiar with the matter.

Below is the CFLD’s capital structure: