From Reorg Asia’s Managing Editors
In this column, managing editors Stephen Aldred and Shasha Dai take turns writing about trends in high yield, distressed debt, restructuring and bankruptcy in major Asian markets including China, Southeast Asia, India and Australia. Any opinions or other views expressed in this column are the author's own and do not necessarily reflect the opinion or views of Reorg or its owners. For questions or comments, contact Stephen at email@example.com and Shasha at firstname.lastname@example.org. Send your people and fund news to email@example.com.
Looks like it could be a long, hot summer for Logan.
A formalized and committed ad hoc group (AHG) of the developer’s bondholders - which asserts control of over 25% of the offshore bonds, including its $280 million 7.5% due Aug. 25 notes - are said to be in talks to bring in further like-minded holders.
That, it’s said, could generate a blocking position across at least four of the company’s around $3.9 billion offshore bonds. Critically, the AHG is said to already hold over 50% of the due Aug. 25 notes, according to sources, which under the notes’ terms, generates an effective block on any attempt to annul an acceleration.
On an Aug. 1 bondholder call
, PJT Partners and Ropes & Gray - advisors to the AHG - sounded a clear warning that if the developer takes unilateral action, it would likely trigger the AHG to seek the appointment of provisional liquidators over the group. They added, for good measure, that there are enough defaults to support an acceleration.
The Logan end game has been emerging for a while. Go HERE
to read my earlier comments on the erosion of bondholder trust caused by repeated denials of the existence of private placement notes and HERE
for comments on potential credit enhancements that organized offshore creditors could gain through Logan’s assets.
Among the AHG’s key concerns now is that value residing in unencumbered offshore assets - including a luxury residential development in Hong Kong’s Ap Lei Chau, and the Stirling Residence and Florence Residences in Singapore - could be stripped out and used to pay onshore debt rather than pledged to unsecured offshore creditors.
Those concerns were heightened last week by Reorg’s report
that KWG Group Holdings
has told investors it plans to use part of the HKD 1.3 billion ($165.6 million) proceeds from selling its 50% stake in its Hong Kong Kai Tak project to repay a RMB 1.8 billion ($266.1 million) 5.6% onshore bond puttable Aug. 25.
It will be little comfort to KWG’s offshore bondholders that the company has said not all of the Kai Tak money will go towards repaying the onshore bond. KWG, meanwhile, is also working on raising HKD 4.5 billion financing via its Ap Lei Chau project by the end of August. The fact that Ap Lei Chau is a joint venture with Logan will not have been overlooked by the Logan AHG.
Logan has $3.37 billion in outstanding offshore public notes - including $2.47 billion maturing in 2025 or earlier - and $1.7 billion in offshore private notes. The developer’s due Aug. 25 notes are indicated around 11 cents on the dollar, but significant value may be available in unencumbered offshore assets which could be used to repay unsecured creditors.
The offshore assets in fact are central to a proposed restructuring framework that advisors to the AHG tabled to Logan Chairman Ji Haipeng in July. Under that proposal, all of Logan’s offshore assets were to be pledged to unsecured offshore creditors. A further around $3 billion from the sale of unspecified onshore assets would also be pledged to unsecured offshore creditors, after secured debt was paid down.
That proposal also called for parity on maturity of all offshore restructured debt. Logan had earlier proposed
a four-year amortization plan for its $1.7 billion offshore private notes and a seven-year amortization proposal for its outstanding offshore public bonds. The July AHG proposal also stated that no further security was to be added to already secured debt.
The lack of a response from Logan to the AHG’s restructuring framework proposal, and the recent hire of Haitong International as an advisor for the company’s offshore restructuring has fueled a suspicion that Logan is taking a more aggressive approach to its restructuring, and could veer towards a unilateral proposal along the lines of R&F Properties
R&F Properties successfully termed out on July 14
all 10 series of its public offshore notes through a unilateral consent solicitation. The liability management exercise (LME) proposal included a fall-back scheme of arrangement offering different terms more favorable to the company. It significantly extended the maturity of the public offshore notes while offering minimal credit enhancements, despite the availability of potentially significant offshore assets.
For Reorg’s analysis on the R&F consent solicitation, including the prioritization of onshore over offshore debt, go HERE
But Logan is not R&F.
Haitong International has been contacting individual bondholders with potential LME proposals, including a consent solicitation to extend the $280 million 7.5% notes due Aug. 25. The company aims to reach an agreement with creditors before the Aug. 25 note maturity, according to PJT and Ropes & Gray.
The advisors told the Aug. 1 meeting that they do not need a deal by Aug. 25 and warned them not to fall for any divide-and-conquer strategy.
In rallying support for a consensual restructuring - and for its earlier proposal - Logan’s AHG has signaled it has a clear legal path to action, and a path to block Logan’s action if needed.
Logan may have plans for the summer. But if those plans include enacting a unilateral restructuring, then grabbing a beach towel and laying out in the sun somewhere until September, it might have a nasty surprise coming.
A line has been drawn in the sand.
And it looks like a long, hot summer ahead.
–Stephen Aldred, Managing Editor - Asia
From Our Financial & Legal Analysts
Below are links to recent reports written by our financial and legal analysts:
Reorg Webinar Series: Macau Gaming - An Overview of Upcoming Regulatory Changes
- Macau’s amended gaming law was approved by legislators in June and is set to take effect upon the likely completion of a concession tender process in the second half of 2022. This webinar featuring guest lawyers Tiago Assunção and Daniel da Silva e Melo from Manuela António, and Reorg’s Senior Credit Analyst Leon Leong, discussed key legal takeaways from the amended gaming law alongside other regulatory milestones to note in the second half of 2022.
Bankruptcy Industry Update/ Legal Analysis
: A new standalone Cayman restructuring regime comes into force on Aug. 31. This regime is separate from the “soft-touch” provisional liquidation technique and introduces a restructuring officer and restructuring moratorium tool.
Reorg Asia Watchlist
Noumi Ltd.’s quarterly cash flow report for the period ended June 30 showed total revenue for Q4’22 at A$135.7 million ($95.1 million), up A$12.4 million or 10.1% quarter on quarter but up 1.3% year on year versus Q4’21, with the company noting a “slight easing” of the effects of Covid-19 in Australia and Asia which impacted sales through financial year 2022. However, Noumi noted a continued impact from rising inflation and other external factors such as “international conflict”.
Read Reorg’s coverage of Noumi HERE
Golden Energy and Resources Ltd. / Stanmore Ltd.
Australian coal company Stanmore Resources Ltd. reported July 28 consolidated June quarter run of mine (ROM) production of 2.9Mt and saleable production of 2.2Mt for the June quarter, noting a strong finish to the quarter following unseasonal mid-quarter wet weather. Stanmore noted rising cost pressures during the quarter, including that the Queensland Government announced significant changes to the coal royalty regime as part of its 2022-23 budget, making royalties for Queensland coal producers the highest in the world.
Read Reorg’s coverage of Golden Energy and Resources / Stanmore HERE
A €13 million chunk of specialist private health oncology services provider GenesisCare’s euro-denominated term loan was put up for auction a few weeks ago but failed to trade. The piece had a reserve price in the 50s but failed to attract any bids. GenesisCare is facing liquidity issues and rising leverage due to margin contraction primarily from its U.S business, and cash burn due to high capital expenditure, requiring the group to raise capital from its shareholders and potential external investors.
Read Reorg’s coverage of GenesisCare HERE
China Real Estate
China has launched a real estate relief program, with an RMB 50 billion pilot from China Construction Bank, which pioneered the origination of home mortgage loans in China in the 1980s and dominated the market for a long time before other banks caught up. The central bank will contribute up to RMB 200 billion to the relief program, which aims to provide some best practices and possible models for other commercial banks.
Read Reorg’s coverage of China Real Estate HERE
Sino-Ocean Capital, an affiliate of Sino-Ocean Group, has been attempting to dissuade holders of its RMB 1B putable Sept. 9 bond from exercising a put option. If it’s unsuccessful in its efforts, the company may propose extending principal payment by one year. According to Chinese corporate registration information, Sino-Ocean Capital has sold its stake in maternity care hospital Amcare Healthcare to a subsidiary of ByteDance, a Chinese tech company known for owning TikTok.
Read Reorg’s coverage of Sino-Ocean Group HERE
During a conference call with bondholders hosted by PJT and Ropes Gray, advisors to an ad hoc group of bondholders, the advisors urged the holders to boycott any unilateral liability management proposals from Logan. The advisors said that the ad hoc group has assembled a 25% blocking position should the company propose one without the group’s consent.
Read Reorg’s coverage of Logan Group HERE
KWG has told some investors that it plans to use part of the proceeds from selling its 50% interest in the Hong Kong Kai Tak project to repay its RMB 1.8B onshore bond putable Aug. 25. The company is also working on various other financing venues by leveraging assets in Hong Kong, Chengdu and Guangzhou.
Read Reorg’s coverage of KWG HERE
Red Star Macalline
In the latest example of Chinese companies issuing new USD notes backed by standby letters of credit, or SBLC, from onshore banks, furniture retail chain Red Star Macalline Group Corp. plans to issue $250 million USD notes backed by an SBLC from Bank of Shanghai.
Read Reorg’s coverage of Red Star HERE
In another example of new debt issuance backed by credit enhancement, Country Garden’s onshore subsidiary proposed to issue RMB 200M asset-backed notes with up to RMB 130M credit risk mitigation warrants from ICBC and China Bond Insurance. Meanwhile, the investigations at Evergrande regarding a missing RMB 13.4B security prompted investor concern over possible illicit dealings between other real estate developers and their property management arms. In response, Country Garden Services’ management held a call on July 27 to reassure investors that it has not provided guarantee for borrowings by its developer affiliate, and that its corporate governance prohibits any illegal money transfer between the two affiliates.
Read Reorg’s coverage of Country Garden HERE
On a call with investors, Gemdale management said they expected net cash flow from operations from the second half of 2022 to be sufficient to cover debt maturing during the same period.
Read Reorg’s coverage of Gemdale Group HERE
On a call with investors, management of Vanke said the company does not have loan payments due for the rest of 2022 or in 2023. The company’s nearest offshore maturity is due April 2023. Selloffs of property company bonds caused Vanke bonds to drop by a few points, which prompted management to hold the call.
Read Reorg’s coverage of China Real Estate HERE
Holders of the developer’s RMB 500 million onshore private placement bond have approved a proposal to remove the 2022 put option and defer put date for one year to 2023. Times China also is expected to receive approval of a similar put deferral plan for its RMB 1.1 billion corporate bond.
Read Reorg’s coverage of Times China HERE
Srei Infrastructure Finance
Small Industries Development Bank of India informed the administrator of Srei Infrastructure Finance Ltd. and Srei Equipment Finance Ltd., Rajneesh Sharma, at the committee of creditors (CoC) meeting held on July 27 that they will remain part of the CoC until completion of the corporate insolvency resolution process (CIRP). However, the National Bank for Agriculture and Rural Development, is yet to decide if it will remain within the CoC, and the committee has asked them to give their decision on the matter as soon as possible.
Read Reorg’s coverage on Srei Infrastructure Finance HERE
Reliance Capital’s committee of creditors (CoC) meeting - which began August 2 - has continued today, August 3. The CoC is discussing a request from prospective resolution applicants for a second extension to the deadline for submission of resolution plans.
Read Reorg’s coverage on Reliance Capital HERE
State Bank of India (SBI) and Varde Partners-backed Aditya Birla Asset Reconstruction Co. Ltd. are finalising a renegotiated bid of INR 16.22 billion ($205.6 million), up from the INR 15.441 billion that the ARC offered earlier for the non-performing loans, or NPLs, of KSK Mahanadi Power Ltd. aggregating INR 38.15 billion. The loans aggregate to INR 38.15 billion and the revised bid will result in a recovery for SBI of 42.51 cents on the dollar compared to the previous 40.5 cents under the original bid.
Read Reorg’s coverage on KSK Energy HERE
Amazon.com NV Investment Holdings LLC (Amazon) on July 28 moved the Supreme Court against the June 13 order of the National Company Law Appellate Tribunal (NCLAT), which upheld the Competition Commission of India (CCI) order which had kept the share subscription agreement (SSA) between Amazon and Future Coupons Pvt. Ltd. (FCPL) in abeyance.
Read Reorg’s coverage on Future Retail HERE
Management of Indian telecommunication company Vodafone Idea Ltd. said on an investor call attended by Reorg on Aug. 4 that the company is in active talks to raise funds via new bank facilities which will be primarily used for network investment.
Read Reorg’s coverage on Vodafone Idea HERE
Reorg Asia Special Coverage
State-owned Union Bank of India has received single bids for both the INR 1 billion ($12.7 million) non-performing loans, or NPLs, of Srinagar Banihal Expressway Ltd., and Sew Krishnagar Bahrampore Highways Ltd.’s INR 715.5 million outstanding NPLs, at an auction held on Aug. 3. Asset Reconstruction Company India Ltd. (ARCIL) bid INR 810 million for Srinagar Banihal Expressway, while SSG Capital-backed Assets Care & Reconstruction Enterprise Ltd. (ACRE) bid INR 430 million for Sew Krishnagar Bahrampore.
Read Reorg Asia Special Coverage HERE
Indonesian healthcare and property conglomerate PT Lippo Karawaci Tbk (LPKR) is exploring options to fund a possible partial buyback of its $420 million 8.125% senior notes due January 2025. The company has held talks with banks for a potential loan facility, but no mandate has been awarded. BNI and Bank Mandiri have been sounding their respective relationship banks to gauge appetite for the facility.
Read Reorg’s coverage on Lippo Karawaci HERE
Indonesia’s flag carrier Garuda Indonesia announced Aug. 2 that on Aug. 1 it had returned two Bombardier CRJ-1000 aircraft as part of an initial phase-out of 18 total aircraft as the result of negotiations between the carrier, Nordic Aviation Capital (NAC) and Export Development Canada (EDC). In a separate report, disclosures in the carrier’s financials for the period ended March 31 show that in addition to the SIAC lawsuit, Greylag further filed for a freezing of 100-owned subsidiary “Garuda Indonesia France Holiday” (GIHF) accounts in France. The financials show GIHF had over $5.2 billion of total assets before elimination.
Read Reorg’s coverage on Garuda Indonesia HERE
Indonesian tire maker PT Gajah Tunggal Tbk said in response to a question from Reorg at a public expose on July 28 that the company will talk to banks when it is necessary for any loosening of its covenants. Reorg previously reported on July 25 that based on its second quarter unaudited financials for the period ending June 30, Gajah Tunggal is likely pushing up against the requirement to maintain a debt-to-EBITDA ratio of 4.35x under two syndicated credit facilities and certain short-term bank loan facilities.
Read Reorg’s coverage on Gajah Tunggal HERE
Below is a list of events on the Reorg Asia Calendar for the next two weeks