Ad Hoc Committee of CFLD’s Offshore Noteholders Says It Has Instructed Trustee to Prepare Winding-Up Petition as Statutory Demand Lapses This Week; CFLD Says Holders Representing Over 50% of Offshore Notes Have Signed RSA; Co. Plans to Initiate English Scheme of Arrangement

Alvarez & Marsal and Latham & Watkins, advisors to an ad hoc committee, or AHC, of China Fortune Land Development Co.’s offshore public bondholders said during a call today, Nov. 8, that they have instructed the trustee to prepare documents to file a petition to wind up the issuer and/or the guarantor as a statutory demand expires this Thursday, Nov. 10, according to two sources familiar with the matter.

The advisors said on the call that bondholders signing up for the RSA does not prevent the trustee from pursuing a winding-up action, adding that unless and until there is a formal legal process such as a consent process or a scheme process that has been launched and supported by the requisite percentage of the bondholders, there is no effect on the bondholders’ right to demand repayment or their rights to pursue a winding-up action against the issuer and/or guarantor.

The AHC has demanded that due diligence be carried out on assets expected to be sold, the advisors said on the call, adding that the company has not allowed Alvarez & Marsal or Latham & Watkins to carry out any due diligence, despite the fact that both parties had signed NDAs. The advisors said the AHC remains most focused on the asset sale plan, including the timing, proceeds that could come from the sale, processes in which the assets are being sold and counter parties. However, the advisors said there has been no visibility in this process, as there has been no meaningful engagement from the company after over a year of efforts to work consensually.

The AHC added that it plans to continue negotiating with the company on behalf of all bondholders to get a legally enforceable deal which would commit the company to pay a catch-up fee that has already been paid to onshore creditors. The committee added that the plan should also include a milestone payment and a legally payable annual cash coupon.

Under the current RSA, the advisors said on the call, the deal is designed to have zero payment for eight years, with the potential of there being no payment, be it coupon or milestone payments, for the period of time. There are also no legally binding payments included in the RSA, with much dependent upon the company’s best efforts, advisors said during the call.

As reported, AHC members had instructed the trustee, the Bank of New York Mellon, to issue a statutory demand against both the issuer, CFLD (Cayman) Investment Ltd., and the guarantor, China Fortune Land Development Holdings Co. Ltd.

In a separate announcement to the Shanghai Stock Exchange today, CFLD disclosed that holders representing over 50% of the roughly $4.96 billion total principal amount of offshore notes have signed the RSA. Of those, holders representing over $1 billion principal amount have opted to have part of their debt claims swapped for equity interests, according to the announcement.

CFLD said it has decided to go through an English scheme of arrangement for its offshore debt restructuring. If the restructuring plan is approved by the U.K. court, the plan will be binding to all the USD note holders. The company said it will initiate the U.K. proceedings as soon as possible, and will go through the necessary approval process before the debt-to-equity swaps are implemented, the announcement shows.

As of Oct. 31, CFLD had signed onshore debt restructuring agreements with creditors of a cumulative RMB 126.222 billion financial debt claims and has reduced or waived a total of RMB 11.35 billion debt, interest and penalty, the same announcement shows.

CFLD's capital structure is as follows: