UPDATE 1: Hilong Selects Admiralty Harbour for Bond Extension Talks

UPDATE 1: 6:03 a.m. ET 3/21/2024: Hilong Holding has selected Admiralty Harbour to advise on a further extension of offshore debt maturities, including outstanding restructured $314 million, 9.75% due Nov. 18 notes, according to two sources familiar with the matter.

The Hong Kong-listed Chinese oilfield equipment and services company also selected an international legal advisor, said one of the sources.

Hilong announced on Tuesday, March 19 that it had “engaged a financial adviser” and was “in the process of assessing and communicating with the creditors to formulate a plan and the implementation of related measures for the extension of debts”.

The debt was among three issues the announcement cited as being raised by auditor PricewaterhouseCoopers while in the process of preparing Hilong’s 2023 results. The other two issues involved the trading of certain pipe materials by Russian subsidiaries in the past two years and payments made to some suppliers.

The outstanding senior bonds stem from a restructuring that Hilong completed in May 2021 to term out two precursor tranches, including one that was past due. Admiralty Harbour also advised on that exchange offer along with Sidley Austin.

Hilong didn’t respond to an emailed request for comment. Admiralty Harbour declined to comment.

--Ziyu Zhang

 

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Original Story 11:46 p.m. UTC on March 19, 2024

Hilong Holding Auditor PwC Raises Issues Regarding Co.’s Transactions, Co. to Delay Release of FY’23 Results, Engages EY for Investigations; Trading in Shares to Be Suspended Effective April 2

Relevant Document:
Announcement

Hilong Holding Ltd. announced to the Hong Kong stock exchange on March 19 that during the course of the audit process and preparation of its annual results for the year ended Dec. 31, 2023, PricewaterhouseCoopers, the auditor of the company, identified certain issues in relation to some of the group’s transactions. The key issues identified by the auditor are summarized below:

1. As of Dec. 31, 2023, the group’s outstanding principal amount of senior notes amounted to $314 million with a maturity date on Nov. 18, and it is noted that the company is still in the process of assessing and communicating with the creditors to formulate a plan and the implementation of related measures for the extension of debts to support that the group will be able to continue as a going concern.

2. The transactions for sale and procurement of pipe materials entered into by certain Russian subsidiaries of the group for the years ended Dec. 31, 2022 and 2023 and a business entity (“Entity A”) domiciled in Russia. The auditor raised concerns about certain details of the transactions and suggested that, among others, (i) the audit committee of the company is responsible for the formation of an independent investigation committee; (ii) the independent investigation committee shall appoint an independent third-party investigative agency to assist its investigation on, among others, (a) the concerns raised by the auditor with respect to the transactions; (b) the relationship between the group and Entity A; and (c) the commercial basis of the transactions.

3. The auditor raised concerns about certain details of prepayments made by the group to its suppliers in relation to the procurement of pipeline materials, equipment and others, and the company is obtaining further information and supporting documents to ascertain the business substance and support the relevant audit work.

As of March 19, the board and the audit committee are working proactively with the auditor to address the above issues and any other matters raised by the auditor, and the investigation committee has engaged Ernst & Young (China) Advisory Ltd. on March 12 as the forensic accounting specialist to conduct the investigation with the intention to complete the investigation and finalize the 2023 annual results before the end of March, the announcement states.

The board said as it needs more time to finalize the 2023 annual results and complete the investigation, and the auditor also needs more time to collect information and complete the audit, it will delay the publication of the annual results. Therefore, trading in its shares is expected to be suspended with effect from April 2 at 9 a.m., pending the publication of the annual results, according to the announcement.

Hilong Holding’s capital structure is below: