Reorg Blog

Reorg's EMEA Core Credit team has published 19 updates so far this year on KME Group, one of the world's largest copper producers. In its second-quarter call in October 2020, KME’s management guided that the extension to its borrowing base facility would be concluded in November 2020. By mid-December 2020, the company said it had received extension commitments from 51% of its lenders. At the start of January this year, Reorg reported that the company had obtained the approval of over 70% of its lenders. The delay in the extension of the facility was due to some lenders’ concern about the sharp rise in copper price, which translates into increased funding requirements for the company, sources said. The implications of rising copper prices on the group’s funding is something that Reorg previously highlighted, especially in the context of reduced working capital funding following the termination of the MKM borrowing base facility.

Discussing REIT chapter 11 filings and out-of-court restructurings and financings that certain REITs are using to avoid bankruptcies, our Americas Core Credit experts Mark Fischer, Kevin Eckhardt and Wing Li will be conducting a webinar on Friday, April 23 at 11:00am ET to help provide further transparency on the industry. Our team will be discussing certain REIT subsectors and how companies have restructured capital structures in light of reduced revenue caused by the Covid-19 pandemic. Mall REITs CBL and Pennsylvania REIT have each sought chapter 11 protection, and Washington Prime Group has warned of a possible chapter 11. However, hotel REITs Ashford Hospitality and Hersha Hospitality have so far avoided bankruptcy by securing out of court financing and selling assets, respectively.  Our coverage team will discuss potential reasons why certain REITs have avoided bankruptcy and how REITs have used the bankruptcy process to fix their balance sheets. Register for the webinar here: https://reorg.zoom.us/webinar/register/3916178217068/WN_4xpg5cR6RpyNPFajhvpKUQ  If you’re already a subscriber, you can view our ever-expanding coverage of REITs here: https://bit.ly/3edVMRF

The onshore creditors’ committee of industrial park developer China Fortune Land Development, or CFLD, has appointed Dentons and KPMG as its legal and financial advisors, respectively, which began due diligence on April 1, two creditor sources said citing the first creditor committee meeting held yesterday, April 7. The meeting was attended by CFLD CFO Wu Zhongbin, committee co-chairs Ping An Asset Management and ICBC, the two advisors and other committee members, according to the sources. Click through to request trial access: http://ow.ly/ro6550Emwb9

Written by Stephen Aldred, Managing Editor, Asia Core Credit || Indonesian textile company PT Sri Rejeki Isman Tbk’s (Sritex) restructuring will play out in an arena where the company has far narrower funding sources available. Sritex’s lenders are sounding the market to sell their holds. The company’s bonds are trading in the low to mid-30s and its unsecured loan debt is expected to price south of those marks. Somewhat perversely, reduced funding sources may serve the company well, as increased scale has not improved Sritex’s operating efficiency. Sritex has generally seen a lengthening working capital cycle financed by debt, resulting in poor cash conversion despite higher reported earnings. If Sritex de-prioritises growth and flatlines or reduce sales in the future, its working capital intensity could decrease, releasing cash towards debt-servicing (assuming limited impairments associated with its receivables - related party receivables have been growing, as has a growing stock of inventories). That could result in a more sustainable capital structure in the context of narrower sources of financing.  || Sign up for our weekly updates here.

More recently than ever, the success rates for lenders to push back against terms in their agreements or to push for the inclusion of others have increased. 2021 leveraged loan market trends have taken a turn to benefit lenders, plus some terms that used to be considered aggressive are becoming more and more familiar in these amendments. Our Americas Covenants team analyzes and reviews some of the most prominent 2021 leveraged loan market trends emphasizing the fact that these are exceptions to the rule.  First, the team discusses the most favored nations (MFN) protection where lenders have been trying to break down the strength of this protection agreement in terms of pricing differences, length and scope. Next, our Americas Covenants team takes a look at the anti-PetSmart guarantor protections where guarantors and liens on assets could be released in an easy manner creating credit agreement provisions that include the block of the release of guarantors. Further in the article, our team discusses provisions to erroneous payments as a result of the Revlon and Citibank mistaken wire transfer, transfers to unrestricted subsidiaries, and a few other provisions that are becoming increasingly more common including earlier maturing debt, debt using restricted payment capacity and more. Read our Americas Covenants team’s full analysis of the 2021 leveraged loan market trends here: https://reorg.com/leveraged-loan-market-trends/