Reorg Asia Bi-Weekly
It’s (now even more) complicated - Hin Leong and the JM claims (Aug. 24 - Sept. 7)
Sun 09/06/2020 19:57 PM
From Asia Core Credit’s Managing Editors
In this column, managing editors Stephen Aldred and Shasha Dai will take turns writing about trends in high yield, distressed debt, restructuring and bankruptcy in major Asian markets including China, Southeast Asia, India and Australia. For questions or comments, contact Stephen at saldred@reorg.com and Shasha at sdai@reorg.com. Send your people and fund news to asiaeditorial@reorg.com, and request a trial to access additional distressed debt analysis from Reorg.
When Reorg reported last week that PricewaterhouseCoopers, judicial managers (JM) for Hin Leong Trading (HLT), had filed claims seeking repayment of around $3.5 billion of the company’s debts from family owners, it should have been no surprise to our readers.
Reorg first flagged the potential for creditor claims against the Lim family as far back as April 21, even as Singapore commodities trader HLT and sister company Ocean Tankers (Pte.) Ltd (OTPL), were seeking moratorium protection in Singapore for a proposed restructuring – our analysis guided us to the fact that HLT was likely insolvent, and had been for some time.
The JM claims set out that Lim family members OK Lim, Evan Lim and Lim Huey Ching – all directors and shareholders of Hin Leong and the latter two the children of OK Lim – are personally responsible for the debt, without limitation of liability due to their conduct since 2012 which has defrauded creditors.
The statement of claims reads like a laundry list of corporate fraud, multiple actions any one of which would indicate a breach of directors’ duties, including: fabrication of swaps trading gains to conceal losses; creating fictitious trading profits; manipulating accounts; causing Hin Leong to overstate its inventory; and causing Hin Leong to obtain financing improperly from bank creditors.
Reorg again had signalled the potential for the PwC to take this route in June after obtaining the Interim Judicial Management (IJM) report on Hin Leong, where it was noted that creditor recovery through a restructuring and rehabilitation had no real prospect of occurring without cooperation of the Lim family – and that remained lacking.
Guidance from our legal analysis then was pointed – “Existing creditors, credit funds, litigation financiers and the IJMs could start considering other options which may potentially be available, including what action they take against the companies’ directors if appropriate.”
One compelling point HLT might drive home to company directors is that litigation funding is now an option for recovery, after the commencement of Singapore’s Insolvency, Restructuring and Dissolution Act which provides further revisions to Singapore’s restructuring regime, and could make additional funding streams more readily available to JMs pursuing certain claims against directors, potentially opening up further creditor recovery streams.
More importantly, the repayment claims against the Lims opens up questions around any refinancing of S$1.5 billion in term loan debt due December at sister company Universal Terminal (S) Pte Ltd (UT). Previously, lenders had been waiting for clarity on the potential sale of the Lim family’s 41% stake in UT, and a restatement of financials to account for impact of HLT and OTPL on the UT accounts receivables.
Creditor considerations are considerably more complex given the claims against Lim family members. Any auditor of UT will likely be highly cautious in signing off on the accounts with an unqualified opinion, and lenders would find it hard to put a refinancing through credit given the losses many already face at HLT and other shipping units, and the risk of unspecified cross claims against cargo warehoused at UT.
Given the likely need to remove the Lim family’s influence from UT, and the possible challenges to refinancing its syndicated loan, banks may be required to put UT into JM should a non-payment scenario occur when the debt matures in December.
--Stephen Aldred, Managing Editor - Asia
AUSTRALIA
Virgin Australia Holdings Ltd.
Bain Capital’s deeds of company arrangement were formally approved on Sept. 4 at the second meeting of creditors in the Virgin Australia administration. Unsecured creditors are to recover 9-13% from a pool of between A$462 million ($335.8 million) and A$612 million with the transfer of shares to Bain expected to be completed by Oct. 31, 2020, as reported.
Read our coverage of Virgin Australia Holdings HERE
Only About Children
Lenders to Bain Capital owned Australian early learning education specialist Only About Children (OAC) are in negotiations over restructuring a A$190 million ($138 million) unitranche loan, and have rejected an initial set of proposals. Bain, meanwhile, is set to defend a suit brought by founder and former OAC CEO Brendan McAssey over A$113.5 million in disputed earnout payments related to the 2016 sale of the company to Bain, as reported.
Read our coverage of Only About Children HERE
CHINA
Shandong Sanxing Group
Changshouhua Food, a listed subsidiary that’s 52.1% owned by Chinese corn oil manufacturer Shandong Sanxing Group, plans to be privatized and unlisted from the Hong Kong stock exchange using funding provided by China Cinda Asset Management Co.
See Reorg’s coverage of Shandong Sanxing HERE.
Peking University Founder Group Company Limited
Trustee BNY Mellon has “strongly urged” PKU Founder bondholders to seek independent legal advice regarding other enforcement options and consider the merits of filing an objection to the administrator’s decision to reject keepwell bonds. Addleshaw, backed by seven bondholders, has suggested legal actions offshore.
See Reorg’s coverage of PKU Founder HERE.
Jiangsu Nantong Sanjian Construction Group
Management of Nantong Sanjian Construction told investors that it does not have any back-up plan if the proposed exchange offer for its $300 million 7.8% senior notes due Oct. 26 fails, which has received support from 60% to 70% of bondholders.
See Reorg’s coverage of Nantong Sanjian HERE.
Yida China
Yida China has reached an agreement with the sole holder of its maturing RMB 802 million corporate bond due Sept. 25 to roll the onshore bond into a secured bank loan. Sichuan Development is still engaged in talks with controlling shareholder, CMIG, to take over Yida China.
See Reorg’s coverage of Yida China HERE.
Tahoe Group
Tahoe Group is contemplating a new ownership structure, whereby its beneficial owner Huang Qisen, strategic investor China Vanke and another financial institution investor will hold equal stakes in the company. China Vanke and the financial institution investor will own more voting rights.
See Reorg’s coverage of Tahoe HERE.
Suning Appliance Group
After posting sluggish operating results for H1’20, Shenzhen-listed electronics retailer Suning.com and its parent company Suning Appliance have both seen their onshore and offshore bonds trading down over the past few weeks. Meanwhile, market concern is mounting over Suning’s ability to meet a total of RMB 22.345 billion maturities in the next 12 months.
See Reorg’s coverage of Suning HERE.
Shandong Ruyi Technology Group
Shandong Ruyi Technology Group will maintain the current 7.9% coupon rate on its RMB 1.5 billion corporate bond due 2023 and puttable Sept. 18 (“18 Ruyi 01”) for the bond’s remaining tenor while it previously told holders it will not be able to meet the put option on Sept. 18 , although it plans to make the RMB 118.5 million coupon payment under the bond due in September.
See Reorg’s coverage of Shandong Ruyi HERE.
Macrolink Holding
Chinese conglomerate, Macrolink Holding, is close to signing a definitive agreement to transfer a minority stake and debts in its Shenzhen-listed subsidiary Macrolink Culturaltainment to a “provincial level investment platform” for “billions of RMB” to be used for holdco’s debt repayment. The signing of the deal is expected in a month or so.
See Reorg’s coverage of Macrolink Holding HERE.
INDIA
Edelweiss Group
Asia-focused private equity firm PAG Asia’s Aug. 27 announced acquisition of a 51% stake in Edelweiss Wealth Management for INR 22 billion ($298 million), is part of an ongoing restructuring of Edelweiss Financial Services Ltd. That process, including sales of assets, has accelerated with the impact of Covid-19, and the group is also selling the entire wholesale loan book of non-bank financial company ECL Finance Ltd, which is valued at around INR 100 billion.
Read Reorg’s coverage of Edelweiss Group HERE.
Lavasa Corporation
U.S.-based Interups Inc. is planning to submit a final bid for the consolidated corporate insolvency resolution process of Lavasa Corporation Limited and its subsidiaries. The latest bidding process follows a Feb. 26 National Company Law Tribunal Mumbai Mumbai order that clubbed the CIRPs of Lavasa group companies together to derive better valuation for the creditors given the inter-dependence of the companies. Fresh set of bids were called on March 16 but had to be extended four times due to lack of interest from prospective bidders as interest waned for a real estate company due to Covid-19.
Read Reorg’s coverage of Lavasa Corporation HERE.
SOUTHEAST ASIA
Alam Sutera Realty Tbk
PT Alam Sutera Realty Tbk is canvassing the market for anchor support as it seeks a window of opportunity to issue up to $485 million proposed notes to refinance its outstanding $115 million 11.5% notes due April 2021 and $370 million 6.625% notes due April 2022 as soon as possible. Though the proposed issuance may be perceived as a distressed exchange to address the 2021 maturity, initial indications point to the exchange offer being viewed positively along with the perception of an improved probability of the exchange being actioned.
Read Reorg’s coverage of Alam Sutera Realty HERE.
PT Bumi Resources Tbk
PT Bumi Resources Tbk (Bumi), an Indonesian thermal coal miner, stated during an investors’ call that the company was still awaiting a formal notification of the extension of PT Arutmin’s mining licence - which was earlier expected to be received in August - and that this would be crucial for the company to begin refinancing talks with its major lenders. Meanwhile, financial advisors are circling PT Bumi Resources Tbk (BUMI) mulling the possibility of debt restructuring of the Indonesian coal mine producer.
Read Reorg’s coverage of PT Bumi Resources Tbk HERE.
From Our Financial & Legal Analysts
Below are links to reports written this week by our financial and legal analysts.
Fundraising and People Move News
Send your people and fund news to asiaeditorial@reorg.com.
Credit Suisse Group plans to double its headcount in China over five years as the firm accelerates its pursuit of the nation’s wealthy, adding to its China workforce as it targets a 100% increase in revenue there, Asia CEO Helman Sitohang said in an interview with Bloomberg.
Ex-Point72 Asset trader Nicolas Kuo-Tsing-Jen is among four industry veterans starting a new Hong Kong hedge fund. The other founders of 120 Capital are Benoit Pedrono, a former Segantii portfolio manager; Sebastien Cerbourg, founder at Three Stones; and former UBS credit trader Antoine Thibaud, according to Bloomberg.
Week Ahead
Below is a list of events on the Reorg Asia Calendar for the next two weeks
For questions and comments about our content, please contact questions@reorg.com. For inquiries about trial or subscription, please contact sales@reorg.com.
In this column, managing editors Stephen Aldred and Shasha Dai will take turns writing about trends in high yield, distressed debt, restructuring and bankruptcy in major Asian markets including China, Southeast Asia, India and Australia. For questions or comments, contact Stephen at saldred@reorg.com and Shasha at sdai@reorg.com. Send your people and fund news to asiaeditorial@reorg.com, and request a trial to access additional distressed debt analysis from Reorg.
When Reorg reported last week that PricewaterhouseCoopers, judicial managers (JM) for Hin Leong Trading (HLT), had filed claims seeking repayment of around $3.5 billion of the company’s debts from family owners, it should have been no surprise to our readers.
Reorg first flagged the potential for creditor claims against the Lim family as far back as April 21, even as Singapore commodities trader HLT and sister company Ocean Tankers (Pte.) Ltd (OTPL), were seeking moratorium protection in Singapore for a proposed restructuring – our analysis guided us to the fact that HLT was likely insolvent, and had been for some time.
The JM claims set out that Lim family members OK Lim, Evan Lim and Lim Huey Ching – all directors and shareholders of Hin Leong and the latter two the children of OK Lim – are personally responsible for the debt, without limitation of liability due to their conduct since 2012 which has defrauded creditors.
The statement of claims reads like a laundry list of corporate fraud, multiple actions any one of which would indicate a breach of directors’ duties, including: fabrication of swaps trading gains to conceal losses; creating fictitious trading profits; manipulating accounts; causing Hin Leong to overstate its inventory; and causing Hin Leong to obtain financing improperly from bank creditors.
Reorg again had signalled the potential for the PwC to take this route in June after obtaining the Interim Judicial Management (IJM) report on Hin Leong, where it was noted that creditor recovery through a restructuring and rehabilitation had no real prospect of occurring without cooperation of the Lim family – and that remained lacking.
Guidance from our legal analysis then was pointed – “Existing creditors, credit funds, litigation financiers and the IJMs could start considering other options which may potentially be available, including what action they take against the companies’ directors if appropriate.”
One compelling point HLT might drive home to company directors is that litigation funding is now an option for recovery, after the commencement of Singapore’s Insolvency, Restructuring and Dissolution Act which provides further revisions to Singapore’s restructuring regime, and could make additional funding streams more readily available to JMs pursuing certain claims against directors, potentially opening up further creditor recovery streams.
More importantly, the repayment claims against the Lims opens up questions around any refinancing of S$1.5 billion in term loan debt due December at sister company Universal Terminal (S) Pte Ltd (UT). Previously, lenders had been waiting for clarity on the potential sale of the Lim family’s 41% stake in UT, and a restatement of financials to account for impact of HLT and OTPL on the UT accounts receivables.
Creditor considerations are considerably more complex given the claims against Lim family members. Any auditor of UT will likely be highly cautious in signing off on the accounts with an unqualified opinion, and lenders would find it hard to put a refinancing through credit given the losses many already face at HLT and other shipping units, and the risk of unspecified cross claims against cargo warehoused at UT.
Given the likely need to remove the Lim family’s influence from UT, and the possible challenges to refinancing its syndicated loan, banks may be required to put UT into JM should a non-payment scenario occur when the debt matures in December.
--Stephen Aldred, Managing Editor - Asia
AUSTRALIA
Virgin Australia Holdings Ltd.
Bain Capital’s deeds of company arrangement were formally approved on Sept. 4 at the second meeting of creditors in the Virgin Australia administration. Unsecured creditors are to recover 9-13% from a pool of between A$462 million ($335.8 million) and A$612 million with the transfer of shares to Bain expected to be completed by Oct. 31, 2020, as reported.
Read our coverage of Virgin Australia Holdings HERE
Only About Children
Lenders to Bain Capital owned Australian early learning education specialist Only About Children (OAC) are in negotiations over restructuring a A$190 million ($138 million) unitranche loan, and have rejected an initial set of proposals. Bain, meanwhile, is set to defend a suit brought by founder and former OAC CEO Brendan McAssey over A$113.5 million in disputed earnout payments related to the 2016 sale of the company to Bain, as reported.
Read our coverage of Only About Children HERE
CHINA
Shandong Sanxing Group
Changshouhua Food, a listed subsidiary that’s 52.1% owned by Chinese corn oil manufacturer Shandong Sanxing Group, plans to be privatized and unlisted from the Hong Kong stock exchange using funding provided by China Cinda Asset Management Co.
See Reorg’s coverage of Shandong Sanxing HERE.
Peking University Founder Group Company Limited
Trustee BNY Mellon has “strongly urged” PKU Founder bondholders to seek independent legal advice regarding other enforcement options and consider the merits of filing an objection to the administrator’s decision to reject keepwell bonds. Addleshaw, backed by seven bondholders, has suggested legal actions offshore.
See Reorg’s coverage of PKU Founder HERE.
Jiangsu Nantong Sanjian Construction Group
Management of Nantong Sanjian Construction told investors that it does not have any back-up plan if the proposed exchange offer for its $300 million 7.8% senior notes due Oct. 26 fails, which has received support from 60% to 70% of bondholders.
See Reorg’s coverage of Nantong Sanjian HERE.
Yida China
Yida China has reached an agreement with the sole holder of its maturing RMB 802 million corporate bond due Sept. 25 to roll the onshore bond into a secured bank loan. Sichuan Development is still engaged in talks with controlling shareholder, CMIG, to take over Yida China.
See Reorg’s coverage of Yida China HERE.
Tahoe Group
Tahoe Group is contemplating a new ownership structure, whereby its beneficial owner Huang Qisen, strategic investor China Vanke and another financial institution investor will hold equal stakes in the company. China Vanke and the financial institution investor will own more voting rights.
See Reorg’s coverage of Tahoe HERE.
Suning Appliance Group
After posting sluggish operating results for H1’20, Shenzhen-listed electronics retailer Suning.com and its parent company Suning Appliance have both seen their onshore and offshore bonds trading down over the past few weeks. Meanwhile, market concern is mounting over Suning’s ability to meet a total of RMB 22.345 billion maturities in the next 12 months.
See Reorg’s coverage of Suning HERE.
Shandong Ruyi Technology Group
Shandong Ruyi Technology Group will maintain the current 7.9% coupon rate on its RMB 1.5 billion corporate bond due 2023 and puttable Sept. 18 (“18 Ruyi 01”) for the bond’s remaining tenor while it previously told holders it will not be able to meet the put option on Sept. 18 , although it plans to make the RMB 118.5 million coupon payment under the bond due in September.
See Reorg’s coverage of Shandong Ruyi HERE.
Macrolink Holding
Chinese conglomerate, Macrolink Holding, is close to signing a definitive agreement to transfer a minority stake and debts in its Shenzhen-listed subsidiary Macrolink Culturaltainment to a “provincial level investment platform” for “billions of RMB” to be used for holdco’s debt repayment. The signing of the deal is expected in a month or so.
See Reorg’s coverage of Macrolink Holding HERE.
INDIA
Edelweiss Group
Asia-focused private equity firm PAG Asia’s Aug. 27 announced acquisition of a 51% stake in Edelweiss Wealth Management for INR 22 billion ($298 million), is part of an ongoing restructuring of Edelweiss Financial Services Ltd. That process, including sales of assets, has accelerated with the impact of Covid-19, and the group is also selling the entire wholesale loan book of non-bank financial company ECL Finance Ltd, which is valued at around INR 100 billion.
Read Reorg’s coverage of Edelweiss Group HERE.
Lavasa Corporation
U.S.-based Interups Inc. is planning to submit a final bid for the consolidated corporate insolvency resolution process of Lavasa Corporation Limited and its subsidiaries. The latest bidding process follows a Feb. 26 National Company Law Tribunal Mumbai Mumbai order that clubbed the CIRPs of Lavasa group companies together to derive better valuation for the creditors given the inter-dependence of the companies. Fresh set of bids were called on March 16 but had to be extended four times due to lack of interest from prospective bidders as interest waned for a real estate company due to Covid-19.
Read Reorg’s coverage of Lavasa Corporation HERE.
SOUTHEAST ASIA
Alam Sutera Realty Tbk
PT Alam Sutera Realty Tbk is canvassing the market for anchor support as it seeks a window of opportunity to issue up to $485 million proposed notes to refinance its outstanding $115 million 11.5% notes due April 2021 and $370 million 6.625% notes due April 2022 as soon as possible. Though the proposed issuance may be perceived as a distressed exchange to address the 2021 maturity, initial indications point to the exchange offer being viewed positively along with the perception of an improved probability of the exchange being actioned.
Read Reorg’s coverage of Alam Sutera Realty HERE.
PT Bumi Resources Tbk
PT Bumi Resources Tbk (Bumi), an Indonesian thermal coal miner, stated during an investors’ call that the company was still awaiting a formal notification of the extension of PT Arutmin’s mining licence - which was earlier expected to be received in August - and that this would be crucial for the company to begin refinancing talks with its major lenders. Meanwhile, financial advisors are circling PT Bumi Resources Tbk (BUMI) mulling the possibility of debt restructuring of the Indonesian coal mine producer.
Read Reorg’s coverage of PT Bumi Resources Tbk HERE.
From Our Financial & Legal Analysts
Below are links to reports written this week by our financial and legal analysts.
- UPDATED MODEL: Noble Trading Co $68.1M Q2 W/C Release Drives $46.9M QoQ Decline in OpCo Net Debt to $372.5M; EBITDA Swings to $23.6M After Negative $15.3M in Q1, Recognizes $61.4M in Impairments; Asset Co Loss Narrows as Jamalco Production Improves, Lower Cash Costs
- Genting Hong Kong Tear Sheet
- LEGAL ANALYSIS: Holdout Creditor Bluesun Files Claims in Hong Kong Court Against Tewoo Entities in Connection With Principal, Interest Owing Under Defaulted $300M 4.625% Bonds; Cites ‘Common Economic Strategic Interest’ Between Tewoo, Tianjin SOE in Exchange Offer “Subordinating Interests” as Creditor to Tewoo
- Hilong Holding - Tear Sheet Update
- Tsinghua Unigroup - Tear Sheet Update
- Lycra - Updated Model
- Exchange Model - Nantong Sanjian 2020.9.2
- China Fortune Land - Tear Sheet Update
- ANALYSIS: Alam Sutera Canvassing Support for Likely Exchange Offer Of New $485M Proposed Notes Against Notes Due 2021, 2022; Further Exchange Implications Outlined
- LEGAL ANALYSIS: PKU Founder Bondholder Options Further Reduced If Onshore Objection Deadline Not Extended Beyond Today, Sept. 3; Administrator May be Able to Curtail Potential Hong Kong Action by Bondholders Against Keepwell Provider
- NEW COVERAGE: Fullerton Healthcare Cites Material Uncertainty as Going Concern; Liquidity Pressure Growing With S$33.7M Loan Due October Following Covenant Waiver; Possible Involvement of RRJ Capital
Fundraising and People Move News
Send your people and fund news to asiaeditorial@reorg.com.
Credit Suisse Group plans to double its headcount in China over five years as the firm accelerates its pursuit of the nation’s wealthy, adding to its China workforce as it targets a 100% increase in revenue there, Asia CEO Helman Sitohang said in an interview with Bloomberg.
Ex-Point72 Asset trader Nicolas Kuo-Tsing-Jen is among four industry veterans starting a new Hong Kong hedge fund. The other founders of 120 Capital are Benoit Pedrono, a former Segantii portfolio manager; Sebastien Cerbourg, founder at Three Stones; and former UBS credit trader Antoine Thibaud, according to Bloomberg.
Week Ahead
Below is a list of events on the Reorg Asia Calendar for the next two weeks
For questions and comments about our content, please contact questions@reorg.com. For inquiries about trial or subscription, please contact sales@reorg.com.
This article is an example of the content you may receive if you subscribe to a product of Reorg Research, Inc. or one of its affiliates (collectively, “Reorg”). The information contained herein should not be construed as legal, investment, accounting or other professional services advice on any subject. Reorg, its affiliates, officers, directors, partners and employees expressly disclaim all liability in respect to actions taken or not taken based on any or all the contents of this publication. Copyright © 2024 Reorg Research, Inc. All rights reserved.