Reorg Asia Bi-Weekly
Logic and Protectionism are Seldom Close Companions (Nov. 16-30)
Sun 11/29/2020 19:23 PM
From Reorg Asia’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.
It’s natural for nations to protect local companies weakened by the Covid-19 pandemic, but Australia’s draft "Foreign Investment Reforms” legislation set to come into effect on Jan. 21, 2021 will have precisely the opposite impact unless amended.
The Australian Treasury’s draft summary paper as it stands – in particular, revoking a money lending exemption for foreign lenders – is likely to drive an iceberg size hole into a A$100 billion ($74.035 billion) syndicated loan market, increase the cost of borrowing, add layers of bureaucracy, and ultimately slow economic recovery from Covid-19.
Given the potential impact, the Treasury’s proposed legislation might generate lending opportunities for local banks and funds. But, as the Asia Pacific Loan Markets Association (APLMA) has noted in a submission to the Treasury, the legislation will also impact secured bonds, and secondary bond and loan trades, including in workout or enforcement situations.
The reforms are not final, and the Treasury is engaged in consultations with the APLMA, with ANZ playing a lead role.
At the heart of the discussions, according to sources involved, the Treasury’s summary paper includes a material change to how foreign lenders participate in secured debt financings. Under the reforms, a new national security test will be applicable to investments involving a sensitive national security business.
The definition of a sensitive national security business is broad: it extends to transport, energy, water and telecommunications infrastructure as well as defence industries, and some media and data businesses.
The reforms critically revoke a money lending exemption for foreign lenders taking security for financing over Australian assets of national security interest. Offshore lenders, for both loans and bonds, will require Foreign Investment Review Board (FIRB) approval for such transactions from January should the amendments come into effect.
Foreign financiers contributed over A$38 billion of A$64 billion total funding through syndicated loans in the first six months of 2020, and generally account for around two-thirds of Australia’s loan market, according to the APLMA.
The removal of the moneylending exemption will deter foreign financiers from participating in loan financings, and even when they are willing to go through FIRB notification or exemption processes, it will generate delay, uncertainty, and expense.
The APLMA notes in its submission that the very short consultation period means its comments have been prepared in haste, without benefit of sector wide discussions, and may not have identified all of the implications of the proposed significant change.
You can argue that consultation is precisely where issues with reforms are resolved, and that the system is currently performing its function.
But it’s also equally clear that the proposed legislation was ill-thought out, and in particular devoid of knowledge of how Australia’s financial markets actually function. Expert consultation on the impact of market reforms should commence before legislation is proposed, not after.
In the case of the reforms under discussion, the problem – driving away foreign capital when it is critically needed – was only belatedly recognized and tabled for discussion.
But then, logic and protectionism are not always close companions.
--Stephen Aldred, Managing Editor - Asia
From Our Financial & Legal Analysts
Below are links to reports written this week by our financial and legal analysts.
AUSTRALIA
Speedcast International
Speedcast International debtors filed a second amended chapter 11 plan, as well as a blackline showing changed pages in the plan, on Nov. 27. In contrast to the Nov. 2 version of the plan, which stated that no substantive consolidation would occur, the second amended plan now states that the plan would be implemented through a substantive consolidation of the assets and liabilities of certain debtors.
Read our coverage of Speedcast International HERE.
Qantas Airways Ltd.
Qantas Airways is in the market with a two-tranche A$500 million ($369 million) syndicated loan, with ANZ, Commonwealth Bank of Australia and Westpac Banking Corporation as mandated lead arrangers and bookrunners. The loan is divided into a two-year tranche offering BBSW+ 250bps and a four year tranche offering BBSW+ 270bps.
Read our coverage of Qantas Airways HERE.
Pilbara Minerals / Altura Mining
The first condition precedent has been met for Resource Capital Fund VII L.P. (Resource Capital) under Pilbara Minerals’ proposed equity capital raise to fund the planned acquisition of Altura Lithium Operations Pty Ltd. Resource Capital’s subscription agreement with Pilbara was conditional on Resource Capital being able to rely on the Foreign Investment Review Board (FIRB) exemption certificate that it already holds, and the FIRB condition precedent has now been satisfied.
Read Reorg’s coverage of Pilbara Minerals HERE and Altura Mining HERE.
Dalrymple Bay Coal Terminal Management
DBCT Management Pty Ltd., via an initial public offering of the company holding the 99-year lease of the Dalrymple Bay Terminal, Dalrymple Bay Infrastructure Ltd (DBI), will refinance A$170 million ($125.47 million) of net debt that will reduce its pro forma debt as at June 30 to A$1.788 billion to align with DBI’s target gearing of 75%.
See Reorg’s coverage of Dalrymple Bay Coal Terminal Management HERE.
CHINA
Tianqi Lithium
Lenders to the distressed lithium manufacturer have agreed in principle to a two-year maturity extension for two syndicated loan facilities totalling $1.884 billion and maturing on Nov. 29, but talks are still ongoing and may not result in a deal. Tianqi has requested the two-year extension, which will be granted only upon satisfaction of key terms demanded by the lenders.
See Reorg’s coverage of Tianqi Lithium HERE.
Tsinghua Unigroup
CICC, underwriter of the chipmaker’s RMB 5 billion 5.2% bond due Dec. 10, 2023, “18 Unigroup 04” will convene a teleconference on Dec. 7 for holders to discuss proposals including the addition of credit enhancement measures. Meanwhile, Tsinghua Unigroup is still negotiating with the holder of its RMB 1.3 billion 5.6% private notes, which earlier vetoed the company’s proposed maturity extension, and plans to hold another bondholder meeting in an effort to avoid triggering cross default across other onshore bonds.
See Reorg’s coverage of Tsinghua Unigroup HERE.
Suning Appliance
The electronics retailer reassured investors that it has prepared sufficient funds to redeem its RMB 9.06 billion ($1.378 billion) 7.3% corporate bonds due Dec. 17 “15 Suning 01” and its RMB 1.04 billion 7.3% corporate bonds puttable on Dec. 14, 2020 “17 Suning 07.”
See Reorg’s coverage of Suning Appliance HERE.
Tahoe Group
The distressed real estate developer is expected to miss a Nov. 30 deadline of entering into agreement with majority bondholders on the debt restructuring plan, as about half of bondholders have pushed back on the plan. Approval from two-thirds of holders by value is needed for the restructuring plan to be effective.
See Reorg’s coverage of Tahoe Group HERE.
NewOcean Energy
The first hearing on NewOcean Energy’s Hong Kong scheme of arrangement is scheduled for Dec. 10, while lenders to the company are considering hiring a new financial advisor to replace Alvarez & Marsal.
See Reorg’s coverage of NewOcean Energy HERE.
China Fortune Land Development
The industrial park developer is contemplating conducting a tender offer or buyback in the secondary market to bolster its slumping bond prices. Sources suggested that the declines had to do with overall negative market sentiment resulting from recent onshore defaults by Tsinghua Unigroup and Yongcheng Coal.
See Reorg’s coverage of CFLD HERE.
China Oceanwide Holdings
The Chinese conglomerate is negotiating with the sole holder of its RMB 5 billion 8.25% corporate bond due Dec. 18 “15 Oceanwide” on alternatives including a potential exchange offer or a maturity extension with upfront payment, as Oceanwide continues to raise funds for the bond repayment.
See Reorg’s coverage of China Oceanwide Holdings HERE.
Greenland Holdings
The real estate developer has proposed to issue up to RMB 3 billion dual-tranche onshore bonds in early December as it faces the maturity of over RMB 16.998 billion onshore notes in the next two months.
See Reorg’s coverage of Greenland Holdings HERE.
Yihua Enterprise
The Chinese furniture and real estate company plans to dispose of its Shenzhen Grand Skylight hotel in Guangdong province for roughly RMB 3 billion to repay bank loans and its RMB 1.2 billion 7.5% corporate bonds due Oct. 20, 2021, “16 Yihua 01.”
See Reorg’s coverage of Yihua Enterprise HERE.
INDIA
Future Retail
Bank lenders to three Future Group companies - Future Enterprises Ltd., Future Retail Ltd. and Future Lifestyle Fashions Ltd. - have signed intercreditor agreements (ICA) as a precursor to initiate one-time restructurings (OTR) under the Reserve Bank of India’s Covid-19 relief framework. The ICAs for Future Supply Chain Solutions Ltd. and Future Consumer Ltd. are expected to be signed in the next few days and the OTR for Future Group is expected to be finalized by mid-December.
See Reorg’s coverage on Future Retail HERE.
Vedanta Ltd.
Vedanta Resources Ltd. remains in talks with some of its key relationship banks over financing to bridge a series of repayment deadlines, with bank loan financing being the preferred near-term solution. Separately, the group has submitted an expression of interest to buy a 52.98% stake held by the Indian government in Bharat Petroleum Corporation Ltd.
See Reorg’s coverage on Vedanta Ltd. HERE.
SOUTHEAST ASIA
PT Pan Brothers Tbk
PT Pan Brothers Tbk is seeking a one-year extension of its $138.5 million revolving credit facility (RCF) which matures on Feb. 1, 2020, and the option to further extend that by another year. The company has appointed financial advisory firm AJCapital Advisory Pte Ltd. and the Indonesian arm of law firm Baker McKenzie, Hadiputranto, Hadinoto & Partners (HHP Law Firm), to draw up financial projections and negotiate a term sheet with lenders.
See Reorg’s coverage on PT Pan Brothers Tbk HERE.
PT Agung Podomoro Land Tbk
Property developer PT Agung Podomoro Land Tbk (APLN) is in talks with external parties to refinance an SSG Capital-led $127 million 9% facility due March 2021. The company is not yet in talks with SSG for a rollover of the facility, although a rollover makes logical sense given added financial comfort provided to APLN by its recent land sale to China Fortune Land Development.
See Reorg’s coverage on PT Agung Podomoro Land Tbk HERE.
Fundraising and People Move News
Send your people and fund news to asiaeditorial@reorg.com.
DLA Piper said in an announcement that Ed Sheremeta is re-joining the firm as a senior real estate partner in the Asia Pacific real estate practice, based in Hong Kong. Sheremeta was previously a partner at DLA Piper in Hong Kong, having joined the firm in 2013.
Mayer Brown has promoted four people in Asia to partners, as part of 27 promotions to partnership globally, effective Jan. 1, 2021, the firm said in a press release. The new Asia partners are: William W. C. Chan, litigation & dispute resolution, Hong Kong; Pierre Dzakpasu, restructuring, Singapore; Nishrin A. Hussain, corporate & securities, Hong Kong; and Boya Shen, banking & finance, Beijing.
White & Case said in a statement that it has expanded the global debt finance practice with the addition of Daniel Abercromby, who joined as a partner in Hong Kong from Weil Gotshal & Manges. Abercromby advises private equity funds and their portfolio companies, as well as credit and other special situations funds, on financings in the Asia-Pacific region with a particular focus on Southeast Asia, India and Greater China.
Week Ahead
Below is a list of events on the Reorg Asia Calendar for the next two weeks
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.
It’s natural for nations to protect local companies weakened by the Covid-19 pandemic, but Australia’s draft "Foreign Investment Reforms” legislation set to come into effect on Jan. 21, 2021 will have precisely the opposite impact unless amended.
The Australian Treasury’s draft summary paper as it stands – in particular, revoking a money lending exemption for foreign lenders – is likely to drive an iceberg size hole into a A$100 billion ($74.035 billion) syndicated loan market, increase the cost of borrowing, add layers of bureaucracy, and ultimately slow economic recovery from Covid-19.
Given the potential impact, the Treasury’s proposed legislation might generate lending opportunities for local banks and funds. But, as the Asia Pacific Loan Markets Association (APLMA) has noted in a submission to the Treasury, the legislation will also impact secured bonds, and secondary bond and loan trades, including in workout or enforcement situations.
The reforms are not final, and the Treasury is engaged in consultations with the APLMA, with ANZ playing a lead role.
At the heart of the discussions, according to sources involved, the Treasury’s summary paper includes a material change to how foreign lenders participate in secured debt financings. Under the reforms, a new national security test will be applicable to investments involving a sensitive national security business.
The definition of a sensitive national security business is broad: it extends to transport, energy, water and telecommunications infrastructure as well as defence industries, and some media and data businesses.
The reforms critically revoke a money lending exemption for foreign lenders taking security for financing over Australian assets of national security interest. Offshore lenders, for both loans and bonds, will require Foreign Investment Review Board (FIRB) approval for such transactions from January should the amendments come into effect.
Foreign financiers contributed over A$38 billion of A$64 billion total funding through syndicated loans in the first six months of 2020, and generally account for around two-thirds of Australia’s loan market, according to the APLMA.
The removal of the moneylending exemption will deter foreign financiers from participating in loan financings, and even when they are willing to go through FIRB notification or exemption processes, it will generate delay, uncertainty, and expense.
The APLMA notes in its submission that the very short consultation period means its comments have been prepared in haste, without benefit of sector wide discussions, and may not have identified all of the implications of the proposed significant change.
You can argue that consultation is precisely where issues with reforms are resolved, and that the system is currently performing its function.
But it’s also equally clear that the proposed legislation was ill-thought out, and in particular devoid of knowledge of how Australia’s financial markets actually function. Expert consultation on the impact of market reforms should commence before legislation is proposed, not after.
In the case of the reforms under discussion, the problem – driving away foreign capital when it is critically needed – was only belatedly recognized and tabled for discussion.
But then, logic and protectionism are not always close companions.
--Stephen Aldred, Managing Editor - Asia
From Our Financial & Legal Analysts
Below are links to reports written this week by our financial and legal analysts.
- Lycra - Updated Tear Sheet
- LEGAL ANALYSIS: BVI Court Provides Guidance on ‘Substantial Injustice’ Debtor Defence to Set Aside Creditor Statutory Demand; Judgment Sides With Creditor Protections to Hold Defaulted Tunghsu Note Issuer Accountable
- LEGAL ANALYSIS: Pinpoint, VP Pursue NYC Excessive Collateral Strategy Against Bank of Baroda, Rolta India Limited Connected With $183M Judgment on Defaulted $300M, $200M SNs
- LEGAL ANALYSIS: Huiyuan Juice Judgment Illustrates Mainland Corporate Structures Likely Limits Role of Hong Kong Courts For Certain Creditor Recovery Actions; Presents Difficulty in Satisfying 2nd ‘Core Requirement’ to Access HK Foreign Company Winding Up
- LEGAL ANALYSIS: Hong Kong Court Alters Stay Protection Accompanying Offshore Provisional Liquidator Recognition
- Tianqi Lithium - Updated Waterfall Model
- Jollibee - Tear Sheet Update
- China Real Estate - October 2020
- LEGAL ANALYSIS: Tsinghua Unigroup’s Non-Payment, Default Under RMB 1.3B 5.6% PPN Likely Triggers Cross Default Under $450M 6% Due 2020 Bonds, Potentially Across Other Offshore USD Issuances
- AMC Holdings - Updated Tear Sheet
AUSTRALIA
Speedcast International
Speedcast International debtors filed a second amended chapter 11 plan, as well as a blackline showing changed pages in the plan, on Nov. 27. In contrast to the Nov. 2 version of the plan, which stated that no substantive consolidation would occur, the second amended plan now states that the plan would be implemented through a substantive consolidation of the assets and liabilities of certain debtors.
Read our coverage of Speedcast International HERE.
Qantas Airways Ltd.
Qantas Airways is in the market with a two-tranche A$500 million ($369 million) syndicated loan, with ANZ, Commonwealth Bank of Australia and Westpac Banking Corporation as mandated lead arrangers and bookrunners. The loan is divided into a two-year tranche offering BBSW+ 250bps and a four year tranche offering BBSW+ 270bps.
Read our coverage of Qantas Airways HERE.
Pilbara Minerals / Altura Mining
The first condition precedent has been met for Resource Capital Fund VII L.P. (Resource Capital) under Pilbara Minerals’ proposed equity capital raise to fund the planned acquisition of Altura Lithium Operations Pty Ltd. Resource Capital’s subscription agreement with Pilbara was conditional on Resource Capital being able to rely on the Foreign Investment Review Board (FIRB) exemption certificate that it already holds, and the FIRB condition precedent has now been satisfied.
Read Reorg’s coverage of Pilbara Minerals HERE and Altura Mining HERE.
Dalrymple Bay Coal Terminal Management
DBCT Management Pty Ltd., via an initial public offering of the company holding the 99-year lease of the Dalrymple Bay Terminal, Dalrymple Bay Infrastructure Ltd (DBI), will refinance A$170 million ($125.47 million) of net debt that will reduce its pro forma debt as at June 30 to A$1.788 billion to align with DBI’s target gearing of 75%.
See Reorg’s coverage of Dalrymple Bay Coal Terminal Management HERE.
CHINA
Tianqi Lithium
Lenders to the distressed lithium manufacturer have agreed in principle to a two-year maturity extension for two syndicated loan facilities totalling $1.884 billion and maturing on Nov. 29, but talks are still ongoing and may not result in a deal. Tianqi has requested the two-year extension, which will be granted only upon satisfaction of key terms demanded by the lenders.
See Reorg’s coverage of Tianqi Lithium HERE.
Tsinghua Unigroup
CICC, underwriter of the chipmaker’s RMB 5 billion 5.2% bond due Dec. 10, 2023, “18 Unigroup 04” will convene a teleconference on Dec. 7 for holders to discuss proposals including the addition of credit enhancement measures. Meanwhile, Tsinghua Unigroup is still negotiating with the holder of its RMB 1.3 billion 5.6% private notes, which earlier vetoed the company’s proposed maturity extension, and plans to hold another bondholder meeting in an effort to avoid triggering cross default across other onshore bonds.
See Reorg’s coverage of Tsinghua Unigroup HERE.
Suning Appliance
The electronics retailer reassured investors that it has prepared sufficient funds to redeem its RMB 9.06 billion ($1.378 billion) 7.3% corporate bonds due Dec. 17 “15 Suning 01” and its RMB 1.04 billion 7.3% corporate bonds puttable on Dec. 14, 2020 “17 Suning 07.”
See Reorg’s coverage of Suning Appliance HERE.
Tahoe Group
The distressed real estate developer is expected to miss a Nov. 30 deadline of entering into agreement with majority bondholders on the debt restructuring plan, as about half of bondholders have pushed back on the plan. Approval from two-thirds of holders by value is needed for the restructuring plan to be effective.
See Reorg’s coverage of Tahoe Group HERE.
NewOcean Energy
The first hearing on NewOcean Energy’s Hong Kong scheme of arrangement is scheduled for Dec. 10, while lenders to the company are considering hiring a new financial advisor to replace Alvarez & Marsal.
See Reorg’s coverage of NewOcean Energy HERE.
China Fortune Land Development
The industrial park developer is contemplating conducting a tender offer or buyback in the secondary market to bolster its slumping bond prices. Sources suggested that the declines had to do with overall negative market sentiment resulting from recent onshore defaults by Tsinghua Unigroup and Yongcheng Coal.
See Reorg’s coverage of CFLD HERE.
China Oceanwide Holdings
The Chinese conglomerate is negotiating with the sole holder of its RMB 5 billion 8.25% corporate bond due Dec. 18 “15 Oceanwide” on alternatives including a potential exchange offer or a maturity extension with upfront payment, as Oceanwide continues to raise funds for the bond repayment.
See Reorg’s coverage of China Oceanwide Holdings HERE.
Greenland Holdings
The real estate developer has proposed to issue up to RMB 3 billion dual-tranche onshore bonds in early December as it faces the maturity of over RMB 16.998 billion onshore notes in the next two months.
See Reorg’s coverage of Greenland Holdings HERE.
Yihua Enterprise
The Chinese furniture and real estate company plans to dispose of its Shenzhen Grand Skylight hotel in Guangdong province for roughly RMB 3 billion to repay bank loans and its RMB 1.2 billion 7.5% corporate bonds due Oct. 20, 2021, “16 Yihua 01.”
See Reorg’s coverage of Yihua Enterprise HERE.
INDIA
Future Retail
Bank lenders to three Future Group companies - Future Enterprises Ltd., Future Retail Ltd. and Future Lifestyle Fashions Ltd. - have signed intercreditor agreements (ICA) as a precursor to initiate one-time restructurings (OTR) under the Reserve Bank of India’s Covid-19 relief framework. The ICAs for Future Supply Chain Solutions Ltd. and Future Consumer Ltd. are expected to be signed in the next few days and the OTR for Future Group is expected to be finalized by mid-December.
See Reorg’s coverage on Future Retail HERE.
Vedanta Ltd.
Vedanta Resources Ltd. remains in talks with some of its key relationship banks over financing to bridge a series of repayment deadlines, with bank loan financing being the preferred near-term solution. Separately, the group has submitted an expression of interest to buy a 52.98% stake held by the Indian government in Bharat Petroleum Corporation Ltd.
See Reorg’s coverage on Vedanta Ltd. HERE.
SOUTHEAST ASIA
PT Pan Brothers Tbk
PT Pan Brothers Tbk is seeking a one-year extension of its $138.5 million revolving credit facility (RCF) which matures on Feb. 1, 2020, and the option to further extend that by another year. The company has appointed financial advisory firm AJCapital Advisory Pte Ltd. and the Indonesian arm of law firm Baker McKenzie, Hadiputranto, Hadinoto & Partners (HHP Law Firm), to draw up financial projections and negotiate a term sheet with lenders.
See Reorg’s coverage on PT Pan Brothers Tbk HERE.
PT Agung Podomoro Land Tbk
Property developer PT Agung Podomoro Land Tbk (APLN) is in talks with external parties to refinance an SSG Capital-led $127 million 9% facility due March 2021. The company is not yet in talks with SSG for a rollover of the facility, although a rollover makes logical sense given added financial comfort provided to APLN by its recent land sale to China Fortune Land Development.
See Reorg’s coverage on PT Agung Podomoro Land Tbk HERE.
Fundraising and People Move News
Send your people and fund news to asiaeditorial@reorg.com.
DLA Piper said in an announcement that Ed Sheremeta is re-joining the firm as a senior real estate partner in the Asia Pacific real estate practice, based in Hong Kong. Sheremeta was previously a partner at DLA Piper in Hong Kong, having joined the firm in 2013.
Mayer Brown has promoted four people in Asia to partners, as part of 27 promotions to partnership globally, effective Jan. 1, 2021, the firm said in a press release. The new Asia partners are: William W. C. Chan, litigation & dispute resolution, Hong Kong; Pierre Dzakpasu, restructuring, Singapore; Nishrin A. Hussain, corporate & securities, Hong Kong; and Boya Shen, banking & finance, Beijing.
White & Case said in a statement that it has expanded the global debt finance practice with the addition of Daniel Abercromby, who joined as a partner in Hong Kong from Weil Gotshal & Manges. Abercromby advises private equity funds and their portfolio companies, as well as credit and other special situations funds, on financings in the Asia-Pacific region with a particular focus on Southeast Asia, India and Greater China.
Week Ahead
Below is a list of events on the Reorg Asia Calendar for the next two weeks
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