Thu 02/18/2021 01:24 AM
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PricewaterhouseCoopers, financial advisor to Huachen Energy, has proposed improved terms for the restructuring of the company’s $500 million 6.625% senior notes due May 18, 2020. The revised terms feature a minimum 10% haircut on principal, a call option exercisable anytime by the company during the five-year term-out period, which could further impact the haircut amount based on the timing of the exercise of the call option, said two sources familiar with the matter. Continue reading for our Asia Core Credit team's analysis of  Huachen Energy's proposed improved terms for the restructuring of its $500 million 6.625% senior notes and request a trial for access to our coverage of thousands of other stressed/distressed debt situations in the region. 

If the company exercises the call option within the first two years of the extension period, the company would call the notes at a price which reflects a haircut of more than 20%, the sources said, citing the current proposal.

The revised proposal came after an ad hoc group, advised by Houlihan Lokey, presented a counter proposal that called for a 6.625% cash coupon rate and a call option schedule with a declining haircut rate towards zero at the end of the five-year extension period as well as certain credit enhancement measures, the sources said.

Huachen Energy has rejected the coupon rate under the counter proposal and is maintaining the coupon rate it had proposed previously, which is no higher than China’s five-year loan prime rate, which currently stands at 4.65%, but will raise the cash interest portion of the coupon rate with the remainder to be payment in kind, according to the sources.

The cash interest portion was previously set at 2%, as reported. Under the eight-year no-haircut plan, Huachen will repay 0%, 19%, 7%, 1%, 0%, 1%, 3% and 69% of the principal through 2028, respectively.

The eight-year extension plan with no haircut is still available to both offshore and onshore noteholders, the sources said.

Houlihan Lokey’s ad hoc group consists of six members and holds close to 75% of the $500 million 6.625% senior notes due May 18, 2020, as reported. The group pushed back a five-year termout proposal with 20% haircut, and repayment of 1%, 23%, 11%, 10% and 55% of the outstanding principal in 2021, 2022, 2023, 2024 and 2025, respectively.

Huachen also proposed to pledge to noteholders its 26.7% equity stake in technology, media and telecom focused private equity fund Shanghai Runliangtai Internet of Things Technology Partnership and a 10% stake in Definite Arise Limited, a partner in the Hinkley Point C nuclear power station project in the UK.

The company has presented the proposed terms to noteholders during individual negotiations as opposed to a wider creditors’ meeting, the sources noted.

Representatives of Houlihan Lokey, PwC and Huachen did not immediately respond to requests for comment.

Below is the capital structure of Wintime Energy, the parent company of Huachen:

























































































































































































































































































































Wintime Energy


09/30/2020

EBITDA Multiple

(CNY in Millions)

Amount

US$ Amt.

Maturity

Rate

Book


Bank & Other Borrowings

34,999.1

4,999.9



Total Bank & Other Borrowings

34,999.1

4,999.9

5.9x

13 Wintime Corporate Debt Security 1

3,590.0

512.9

Feb-06-2020

9.500%

17 Wintime 004 Commercial Paper 1

1,500.0

214.3

Jul-05-2018

7.000%

17 Wintime 005 Commercial Paper 1

1,000.0

142.9

Aug-25-2018

7.000%

17 Wintime 006 Commercial Paper 1

800.0

114.3

Oct-23-2018

6.780%

17 Wintime 007 Commercial Paper 1

1,000.0

142.9

Dec-15-2018

7.000%

18 Wintime 001 Commercial Paper 1

1,000.0

142.9

Jan-22-2019

7.000%

18 Wintime 002 Commercial Paper 1

1,000.0

142.9

Mar-19-2019

7.000%

18 Wintime 003 Commercial Paper 1

1,000.0

142.9

Apr-26-2019

7.000%

16 Wintime 001 Corporate Bond 2

760.0

108.6

Mar-30-2022

4.750%

16 Wintime 002 Corporate Bond 2

1,390.0

198.6

Jul-01-2019

4.750%

16 Wintime 003 Corporate Bond 2

1,850.0

264.3

Jul-07-2019

7.500%

17 Wintime 001 Private Placement Note 1

350.0

50.0

Aug-18-2020

7.700%

17 Wintime 002 Private Placement Note 1

180.0

25.7

Nov-15-2020

7.700%

17 Wintime 003 Private Placement Note 1

100.0

14.3

Dec-22-2020

7.900%

18 Wintime 001 Private Placement Note 1

100.0

14.3

Mar-29-2021

7.900%

15 Wintime 001 Medium Term Note 1

1,400.0

200.0

Oct-22-2020

6.180%

15 Wintime 002 Medium Term Note 1

1,400.0

200.0

Nov-27-2020

7.500%

17 Wintime 001 Medium Term Note 1

1,000.0

142.9

Nov-16-2020

7.500%

17 Wintime 002 Medium Term Note 1

1,000.0

142.9

Dec-06-2020

7.500%

18 Wintime 001 Medium Term Note 1

500.0

71.4

Apr-04-2021

7.500%

Total Onshore Bonds

20,920.0

2,988.6

9.4x

$500M 6.625% Senior Bonds Due 2020

3,500.0

500.0

May-18-2020

6.630%

Total Offshore Bonds

3,500.0

500.0

9.9x

Total Debt

59,419.1

8,488.4

9.9x

Less: Cash and Equivalents

(1,644.6)

(234.9)

Plus: Restricted Cash

544.7

77.8

Net Debt

58,319.2

8,331.3

9.8x

Plus: Market Capitalization

17,023.3

2,431.9

Enterprise Value

75,342.5

10,763.2

12.6x

Operating Metrics

US$ Amt.

LTM Reported EBITDA

5,973.0

853.3


Liquidity

Plus: Cash and Equivalents

1,644.6

234.9

Less: Restricted Cash

(544.7)

(77.8)

Total Liquidity

1,099.9

157.1

Credit Metrics

Gross Leverage

9.9x

Net Leverage

9.8x


Notes:
Sources: Reorg, company filings, Wind; restricted cash and EBITDA are H1 2020 figures
1. In default due to failure to meet interest payment
2. Have paid all interest and maturity extended
US$ Translation: CNY/USD rate used for USD conversion is 7.


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