PKU Founder Administrator Submits Restructuring Plan to Court; First RMB 1M Unsecured Claims to Be Paid in Full by Cash; Remainder to Receive Cash, Debt or Equity in NewCo; Zhuhai Huafa, Ping An to Come in as New Investors, Split 30-70 Equity in NewCo of No Less Than 73%; New Money From Investors RMB 53.7B-RMB 73.3B Depending on Whether Creditors Choose All Cash or Cash, Equity/Debt in NewCo

Relevant Documents:
PKU Founder announcement
Ping An Presentation

In a letter sent to creditors today, April 30, seen by Reorg, bankruptcy administrator of Peking University Founder Group has submitted a restructuring plan to Beijing No. 1 Intermediate People’s Court. According to the letter, repayment details for unsecured debt claims include:
 

• The first RMB 1 million ($154,653) claim will be paid by cash in full.
   
• Claims above RMB 1 million will be repaid with cash and equity in the restructured company, or NewCo. Specifically, each RMB 100 claim will receive RMB 20.32 cash and 1.11 shares in NewCo.
   
• Creditors may opt for all-cash payments for shares they stand to receive in NewCo. and choose between one-time cash payment of RMB 31.43 and delayed cash payment (RMB 20.32 cash now and RMB 12.88 debt in NewCo.)
   
• Zhuhai Huafa Group and affiliates and Ping An Life Insurance will repurchase NewCo shares 30-70 at RMB 14.39 per share during the eighth year after the restructuring plan gets approved by court.
   
• Debt in NewCo will be repaid within eight years of the restructuring plan being effective. During the first five years, only interest will be paid. Principal will be repaid starting the sixth year, with 30%, 30% and 40% being paid in each of the last three years. Interest rate during the eight-year period will be calculated at half of LPR, or 2.325% based on the current LPR. Interest accrues daily and is paid annually.
   
• Affiliates of the debtors may choose cash payment only and not receive shares in NewCo in an effort to avoid cross holdings.
   
• Creditors shall communicate to the administrator in writing about their decisions within 10 days of the restructuring plan being approved by the court.
   

The court is obligated to call for a creditors’ meeting within 30 days of receiving the plan. In its letter, the administrator requested creditors to vote in favor of the plan either by writing before the creditors’ meeting or during the meeting. Abstention or no vote is deemed voting against the plan. If the plan does not get approved, the court by law will hold a second vote. If the plan fails to pass the second vote, PKU Founder could be liquidated, the administrator wrote in the letter.

Strategic Investors

In an announcement today, PKU Founder said a consortium consisting of Zhuhai Huafa Group, Ping An Insurance Co. and Shenzhen Tefa Group was chosen as strategic investors in the consolidated bankruptcy restructuring of the debtor and four subsidiaries. The administrator and the investor group signed a restructuring investment agreement today, the announcement shows. Key points of the agreement include:
 

• Zhuhai Huafa and Ping An will split 30-70 an equity interest of no less than 73% in NewCo., with no more than 27% of NewCo owned by pre-bankruptcy creditors.
   
• In the event creditors opt for all cash repayment, the investors will pay the administrator RMB 73.3 billion cash. In the event creditors choose to receive cash and equity/debt of NewCo, the investors will pay the administrator no less than RMB 53.725 billion cash.
   
• All employees of debtors will become employees of NewCo.
   

In an investor presentation released today, Ping An disclosed that Ping An Life Insurance will pay RMB 37.05 billion to RMB 50.75 billion using its own cash resources for an equity interest of between 51.1% and 70% of NewCo.

Ping An Life Insurance will acquire the debtors’ healthcare and financial assets such as hospital beds, pharmaceutical assets, Founder Securities and PKU Founder Life. Shenzhen Tefa Group or its appointed entities will acquire the debtors’ interests in Shenzhen Founder Microelectronics International Co. Ltd., the presentation shows.

Capital structure of PKU Founder is as follows: