Reorg Asia Bi-Weekly
No Haircuts, on Principle (Sept. 21 - Oct. 5)
Sun 10/04/2020 20:55 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.
The rapid exit of lenders from the originally $305 million leveraged buyout loan for Bain Capital-owned air taxi company Trans Maldivian Airways showed convincingly that commercial banks are primed to exit any non-performing credit in a Covid-19 environment. And telling them to take a haircut on their debt is a non-starter in negotiations.
The slew of secondary trades, at pricing from the high 70s to high 80s, saw Bain’s relationship banks HSBC, ING, Nomura, Standard Chartered and Sumitomo Mitsui Banking Corp exit the credit in under a month, replaced by Carlyle, Davidson Kempner, Goldman, BAML, King Street, and Sculptor.
Bain Capital had started out negotiations proposing a haircut on debt, a maturity extension and an injection of finance via super senior debt. Facing a looming vote on enforcement over a missed amortization payment, commercial bank lenders exited at a discount, preferring to preserve a lending relationship over getting caught in a fight over a defaulted asset. Sources note that the haircut request was a particular issue for commercial bank lenders.
Trans Maldivian certainly has much riding against it: an obscure location where few banks have established country lending limits, and prone to political disturbances – Bain’s 2018 buyout took place during one of the country’s periodic States of Emergency; tourism-dependent revenue that went from about $68 million EBITDA at the time of the buyout to pretty much nothing, overnight, and with no best guess as to when revenue will return (IATA predictions are that global international travel won’t return to pre-Covid levels until at least 2024).
But Trans Maldivian also has a lot in its favor.
The fact is, it was always remote, and the territory always had political risks (which is why lenders bought political risk insurance when they joined the deal). And pre-Covid, Trans Maldivian was so cash-generative it didn’t need working capital; Blackstone recapped it not once but twice in two years, taking out all its equity along the way (which is why only two lenders bought credit risk insurance).
Perhaps most notably, Trans Maldivian had Bain Capital as owner.
When the LBO loan was put in place in 2018 for incoming owner Bain, the mandated leads were a top-tier set – some already knew the credit, others were new. But all were keen on deepening their lending relationship with the $105 billion AUM Bain.
Blue-chip private equity clients are keenly sought by commercial banks, for the ancillary business they offer. If Bain had opened negotiations with its second proposal – no haircut, pari debt injection, reduced margins, and equity in the restructured company – sources suggest the story might have had a different ending.
Hindsight is always 20:20, of course.
But as the dust settles on the Trans Maldivian trades, one irony stands out: some of the same banks that exited through secondary trades were also holders of Virgin Australia’s unsecured bonds. When Tor and Broad Peak were looking to lob an alternative restructuring proposal into Virgin’s Deed of Company Arrangement process, internal directives were to not join forces with the hedge funds – bankers were instructed to protect their client relationship with Bain.
The moral of the tale: don’t tell bankers to take a haircut during Covid-19.
--Stephen Aldred, Managing Editor - Asia
AUSTRALIA
Pioneer Credit
Pioneer Credit completed a Nomura Australia-led refinancing of its senior debt via a A$189 million loan ($134.5 million), confirming certain details reported earlier by Reorg. The facility is divided into a A$169 million term loan and a A$20 million purchase facility paying a weighted average interest rate of BBSY+ 11% annually.
Read Reorg’s coverage of Pioneer Credit HERE.
Perenti Global Ltd.
Perenti Global priced $450 million 6.5% guaranteed senior notes due 2025 on Sept. 24 after pulling an MTN issuance in the Australian market. The notes include significant lien up ability and will fund the early redemption of all outstanding $350 million 6.625% senior secured notes due May 2022.
Read Reorg’s coverage of Perenti HERE.
CHINA
Peking University Founder Group Company Limited
Paul Fleming, a partner at Addleshaw Goddard, has urged noteholders in a call on Sept. 29 to submit written directions to the law firm this week to authorize keepwell notes trustee BNY Mellon to commence legal proceedings against the relevant issuers and guarantor within Peking University Founder Group (PKU Founder). Meanwhile, A&M, Grant Thornton and Deloitte have pitched for the liquidator role arising from potential legal actions taken against PKU Founder by the Addleshaw Goddard-advised keepwell bondholders.
See Reorg’s coverage of PKU Founder HERE.
Tunghsu Group
Chinese electronics manufacturer Tunghsu Group has hired Ogier as offshore legal advisor for potentially implementing a scheme of arrangement in the British Virgin Islands for its defaulted $342 million 7% senior notes due June 12, while its financial advisor Admiralty Harbour remains in talks with bondholders on a consensual restructuring, according to two sources familiar with the matter.
See Reorg’s coverage of Tunghsu Group HERE.
Yihua Enterprise Group
Huarong Asset Management Guangdong Branch is eyeing a potential restructuring of Yihua Enterprise Group’s onshore debt, and has proposed purchasing secured onshore public bonds issued by the company. The AMC is only looking to purchase onshore public bonds with pledged assets, and will determine offering prices based on the value of attached collateral and prevailing market prices for any debt.
Read Reorg’s coverage of Yihua Enterprise HERE.
China Evergrande Group
Shandong Hi-Speed Group, a state-owned enterprise that is the largest strategic investor in Hengda Real Estate, has so far refused to provide an extension to a backdoor listing deadline of Hengda Real Estate while Suning Appliance Group came through after negotiations with Evergrande. Investors holding RMB 86.3 billion equity interests in Hengda Real Estate have agreed to convert their interests into common equity of Hengda.
Read Reorg’s coverage of China Evergrande Group HERE.
Tus-Holdings
Tus-Holdings’s proposed issuance of RMB 3.5 billion to RMB 4 billion onshore bonds has stalled due to a lack of investor interest, while the company is looking to sweeten the issuance by proposing to add a guarantee package to the bonds. The company is yet to raise a RMB 2 billion loan to further alleviate its liquidity pressure from an insurance company.
Read Reorg’s coverage of Tus-Holdings HERE.
China Oceanwide Holdings
Oceanwide Holdings has cast aside an earlier proposal for the RMB 3.2 billion 6.9% medium term notes due Oct. 14 (“15 Oceanwide MTN001”), namely, to repay 10% of the principal of the notes and subsequently launch an exchange offer for the remaining 90% of the notes as the proposal has met lukewarm reception from bondholders and was alleged to have had a “negative impact on the company’s market reputation,” according to sources. The company is now looking to fully redeem the notes but has yet to raise sufficient funds as of Sept. 30.
Read Reorg’s coverage of China Oceanwide Holdings HERE.
Tahoe Group
Tahoe Group said it has obtained verbal consents from the majority of its holders of secured debt totaling RMB 70 billion ($10.271 billion) on its preliminary company-proposed debt restructuring plan. In addition, all the project loans to the Fujian-based developer have been extended for three years.
Read Reorg’s coverage of Tahoe Group HERE.
INDIA
Kesoram Industries
Goldman Sachs has agreed to back a one-time restructuring of Kesoram Industries Ltd.’s INR 20 billion ($272 million) debt, joining Farallon Capital in potentially providing private finance to the Birla family-controlled company.
Read Reorg’s coverage on Kesoram HERE.
Shapoorji Pallonji Group
Shapoorji Pallonji Group is in talks with EY India in connection with a potential advisory role to help the company consolidate the balance sheets of its various group companies after the group applied to its lenders for a one-time restructuring under the Covid-19 framework.
Read Reorg’s coverage on Shapoorji HERE.
Trans Maldivian Airways
Lenders to Bain Capital-controlled Trans Maldivian Airways’ originally $305 million buyout loan, which have enforced their rights under the loan documentation after failing to reach an agreement with Bain Capital on restructuring the airlines’ debt, now intend to take possession of the airline and seek recovery of their investments through a sale of the business, said two sources with knowledge.
Read Reorg’s coverage on Trans Maldivian HERE
SOUTHEAST ASIA
Pacific International Lines
MUFG Bank, a lender to Singapore-headquartered shipping group Pacific International Lines Pte Ltd (PIL), has sold exposure of around $50 million of unsecured and secured loans of the company to SC Lowy. PIL has obtained interim financing of up to $112 million from Heliconia Capital Management Pte. Ltd., a wholly-owned subsidiary of Temasek Holdings and remains in talks with the fund for a potential further equity investment.
Read Reorg’s coverage of Pacific International Lines HERE.
Alam Sutera Realty Tbk
PT Alam Sutera Realty Tbk has mandated JP Morgan and UBS as dealer managers in relation to its offer to exchange $115 million outstanding 11.5% senior notes due 2021 and $370 million 6.625% senior notes due 2022 for the company’s USD senior secured notes due 2024 and senior secured notes due 2025, and for a consent solicitation exercise to amend existing indentures in respect of its outstanding notes.
Read Reorg’s coverage on Alam Sutera HERE.
From Our Financial & Legal Analysts
Below are links to reports written this week by our financial and legal analysts.
Send your people and fund news to asiaeditorial@reorg.com.
PwC partner in Australia Chris Hill is joining FTI Consulting as a senior managing director, according to an Australian Financial Review report. Hill’s recent assignments include serving as receiver of Network Ten and adviser to the Velocity Frequent Flyer trustee during the Virgin administration, according to the report.
Oon & Bazul has hired Keith Han as a partner in the firm’s restructuring and insolvency practice, the law firm said in a statement on its website. Han’s LinkedIn profile shows that he was most recently a senior associate at Clifford Chance Asia, a formal law alliance in Singapore between Clifford Chance and Cavenagh Law LLP. Prior to that, Han had worked at a local law firm and served as justices’ law clerk and assistant registrar of the Supreme Court of Singapore. He has appeared as lead counsel at all levels in the Singapore courts including in the Court of Appeal.
Tao Jingzhou, Beijing managing partner of Dechert and a veteran Chinese arbitration lawyer, is leaving the firm to join Arbitration Chambers as an independent arbitrator, according to a report from Law.com.
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.
The rapid exit of lenders from the originally $305 million leveraged buyout loan for Bain Capital-owned air taxi company Trans Maldivian Airways showed convincingly that commercial banks are primed to exit any non-performing credit in a Covid-19 environment. And telling them to take a haircut on their debt is a non-starter in negotiations.
The slew of secondary trades, at pricing from the high 70s to high 80s, saw Bain’s relationship banks HSBC, ING, Nomura, Standard Chartered and Sumitomo Mitsui Banking Corp exit the credit in under a month, replaced by Carlyle, Davidson Kempner, Goldman, BAML, King Street, and Sculptor.
Bain Capital had started out negotiations proposing a haircut on debt, a maturity extension and an injection of finance via super senior debt. Facing a looming vote on enforcement over a missed amortization payment, commercial bank lenders exited at a discount, preferring to preserve a lending relationship over getting caught in a fight over a defaulted asset. Sources note that the haircut request was a particular issue for commercial bank lenders.
Trans Maldivian certainly has much riding against it: an obscure location where few banks have established country lending limits, and prone to political disturbances – Bain’s 2018 buyout took place during one of the country’s periodic States of Emergency; tourism-dependent revenue that went from about $68 million EBITDA at the time of the buyout to pretty much nothing, overnight, and with no best guess as to when revenue will return (IATA predictions are that global international travel won’t return to pre-Covid levels until at least 2024).
But Trans Maldivian also has a lot in its favor.
The fact is, it was always remote, and the territory always had political risks (which is why lenders bought political risk insurance when they joined the deal). And pre-Covid, Trans Maldivian was so cash-generative it didn’t need working capital; Blackstone recapped it not once but twice in two years, taking out all its equity along the way (which is why only two lenders bought credit risk insurance).
Perhaps most notably, Trans Maldivian had Bain Capital as owner.
When the LBO loan was put in place in 2018 for incoming owner Bain, the mandated leads were a top-tier set – some already knew the credit, others were new. But all were keen on deepening their lending relationship with the $105 billion AUM Bain.
Blue-chip private equity clients are keenly sought by commercial banks, for the ancillary business they offer. If Bain had opened negotiations with its second proposal – no haircut, pari debt injection, reduced margins, and equity in the restructured company – sources suggest the story might have had a different ending.
Hindsight is always 20:20, of course.
But as the dust settles on the Trans Maldivian trades, one irony stands out: some of the same banks that exited through secondary trades were also holders of Virgin Australia’s unsecured bonds. When Tor and Broad Peak were looking to lob an alternative restructuring proposal into Virgin’s Deed of Company Arrangement process, internal directives were to not join forces with the hedge funds – bankers were instructed to protect their client relationship with Bain.
The moral of the tale: don’t tell bankers to take a haircut during Covid-19.
--Stephen Aldred, Managing Editor - Asia
AUSTRALIA
Pioneer Credit
Pioneer Credit completed a Nomura Australia-led refinancing of its senior debt via a A$189 million loan ($134.5 million), confirming certain details reported earlier by Reorg. The facility is divided into a A$169 million term loan and a A$20 million purchase facility paying a weighted average interest rate of BBSY+ 11% annually.
Read Reorg’s coverage of Pioneer Credit HERE.
Perenti Global Ltd.
Perenti Global priced $450 million 6.5% guaranteed senior notes due 2025 on Sept. 24 after pulling an MTN issuance in the Australian market. The notes include significant lien up ability and will fund the early redemption of all outstanding $350 million 6.625% senior secured notes due May 2022.
Read Reorg’s coverage of Perenti HERE.
CHINA
Peking University Founder Group Company Limited
Paul Fleming, a partner at Addleshaw Goddard, has urged noteholders in a call on Sept. 29 to submit written directions to the law firm this week to authorize keepwell notes trustee BNY Mellon to commence legal proceedings against the relevant issuers and guarantor within Peking University Founder Group (PKU Founder). Meanwhile, A&M, Grant Thornton and Deloitte have pitched for the liquidator role arising from potential legal actions taken against PKU Founder by the Addleshaw Goddard-advised keepwell bondholders.
See Reorg’s coverage of PKU Founder HERE.
Tunghsu Group
Chinese electronics manufacturer Tunghsu Group has hired Ogier as offshore legal advisor for potentially implementing a scheme of arrangement in the British Virgin Islands for its defaulted $342 million 7% senior notes due June 12, while its financial advisor Admiralty Harbour remains in talks with bondholders on a consensual restructuring, according to two sources familiar with the matter.
See Reorg’s coverage of Tunghsu Group HERE.
Yihua Enterprise Group
Huarong Asset Management Guangdong Branch is eyeing a potential restructuring of Yihua Enterprise Group’s onshore debt, and has proposed purchasing secured onshore public bonds issued by the company. The AMC is only looking to purchase onshore public bonds with pledged assets, and will determine offering prices based on the value of attached collateral and prevailing market prices for any debt.
Read Reorg’s coverage of Yihua Enterprise HERE.
China Evergrande Group
Shandong Hi-Speed Group, a state-owned enterprise that is the largest strategic investor in Hengda Real Estate, has so far refused to provide an extension to a backdoor listing deadline of Hengda Real Estate while Suning Appliance Group came through after negotiations with Evergrande. Investors holding RMB 86.3 billion equity interests in Hengda Real Estate have agreed to convert their interests into common equity of Hengda.
Read Reorg’s coverage of China Evergrande Group HERE.
Tus-Holdings
Tus-Holdings’s proposed issuance of RMB 3.5 billion to RMB 4 billion onshore bonds has stalled due to a lack of investor interest, while the company is looking to sweeten the issuance by proposing to add a guarantee package to the bonds. The company is yet to raise a RMB 2 billion loan to further alleviate its liquidity pressure from an insurance company.
Read Reorg’s coverage of Tus-Holdings HERE.
China Oceanwide Holdings
Oceanwide Holdings has cast aside an earlier proposal for the RMB 3.2 billion 6.9% medium term notes due Oct. 14 (“15 Oceanwide MTN001”), namely, to repay 10% of the principal of the notes and subsequently launch an exchange offer for the remaining 90% of the notes as the proposal has met lukewarm reception from bondholders and was alleged to have had a “negative impact on the company’s market reputation,” according to sources. The company is now looking to fully redeem the notes but has yet to raise sufficient funds as of Sept. 30.
Read Reorg’s coverage of China Oceanwide Holdings HERE.
Tahoe Group
Tahoe Group said it has obtained verbal consents from the majority of its holders of secured debt totaling RMB 70 billion ($10.271 billion) on its preliminary company-proposed debt restructuring plan. In addition, all the project loans to the Fujian-based developer have been extended for three years.
Read Reorg’s coverage of Tahoe Group HERE.
INDIA
Kesoram Industries
Goldman Sachs has agreed to back a one-time restructuring of Kesoram Industries Ltd.’s INR 20 billion ($272 million) debt, joining Farallon Capital in potentially providing private finance to the Birla family-controlled company.
Read Reorg’s coverage on Kesoram HERE.
Shapoorji Pallonji Group
Shapoorji Pallonji Group is in talks with EY India in connection with a potential advisory role to help the company consolidate the balance sheets of its various group companies after the group applied to its lenders for a one-time restructuring under the Covid-19 framework.
Read Reorg’s coverage on Shapoorji HERE.
Trans Maldivian Airways
Lenders to Bain Capital-controlled Trans Maldivian Airways’ originally $305 million buyout loan, which have enforced their rights under the loan documentation after failing to reach an agreement with Bain Capital on restructuring the airlines’ debt, now intend to take possession of the airline and seek recovery of their investments through a sale of the business, said two sources with knowledge.
Read Reorg’s coverage on Trans Maldivian HERE
SOUTHEAST ASIA
Pacific International Lines
MUFG Bank, a lender to Singapore-headquartered shipping group Pacific International Lines Pte Ltd (PIL), has sold exposure of around $50 million of unsecured and secured loans of the company to SC Lowy. PIL has obtained interim financing of up to $112 million from Heliconia Capital Management Pte. Ltd., a wholly-owned subsidiary of Temasek Holdings and remains in talks with the fund for a potential further equity investment.
Read Reorg’s coverage of Pacific International Lines HERE.
Alam Sutera Realty Tbk
PT Alam Sutera Realty Tbk has mandated JP Morgan and UBS as dealer managers in relation to its offer to exchange $115 million outstanding 11.5% senior notes due 2021 and $370 million 6.625% senior notes due 2022 for the company’s USD senior secured notes due 2024 and senior secured notes due 2025, and for a consent solicitation exercise to amend existing indentures in respect of its outstanding notes.
Read Reorg’s coverage on Alam Sutera HERE.
From Our Financial & Legal Analysts
Below are links to reports written this week by our financial and legal analysts.
- AMC Entertainment - Tear Sheet Update
- Puma Energy - Tear Sheet Update
- Jain Irrigation - Tear Sheet Update
- Covenant Brief: Perenti Global’s Proposed $350 Million Notes
Send your people and fund news to asiaeditorial@reorg.com.
PwC partner in Australia Chris Hill is joining FTI Consulting as a senior managing director, according to an Australian Financial Review report. Hill’s recent assignments include serving as receiver of Network Ten and adviser to the Velocity Frequent Flyer trustee during the Virgin administration, according to the report.
Oon & Bazul has hired Keith Han as a partner in the firm’s restructuring and insolvency practice, the law firm said in a statement on its website. Han’s LinkedIn profile shows that he was most recently a senior associate at Clifford Chance Asia, a formal law alliance in Singapore between Clifford Chance and Cavenagh Law LLP. Prior to that, Han had worked at a local law firm and served as justices’ law clerk and assistant registrar of the Supreme Court of Singapore. He has appeared as lead counsel at all levels in the Singapore courts including in the Court of Appeal.
Tao Jingzhou, Beijing managing partner of Dechert and a veteran Chinese arbitration lawyer, is leaving the firm to join Arbitration Chambers as an independent arbitrator, according to a report from Law.com.
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.