Reorg Blog

Chinese real estate developers Yuzhou, Shimao and Logan have issued private bonds in recent months, and more companies have contemplated doing so. These off-balance-sheet borrowings were often raised through special purpose vehicles and not represented on the issuers’ consolidated financial statements. Some market observers view these bonds as the companies’ efforts to circumvent the government’s “three red lines” policy aimed at reining in developers' leverage ratios. While such borrowings add to the opaqueness of the companies’ liabilities, Fitch Ratings said it believes these bonds represent a relatively small portion of the debt structure and have a limited impact on the companies’ repayment risk. Nonetheless, regulators have required developers to report their off-balance-sheet items such as issuance by orphan SPVs, securitization of supply chain financing and equity that is debt-like in nature. Written by Shasha Dai, managing editor, Onshore China. Sign up for weekly updates here.

German rigid plastic producer Paccor boosted its depleted liquidity when it raised an add-on in May to fund the acquisition of Miko Pac. The company, however, continued to burn cash in April and its profitability remains under pressure from rising raw material prices across the plastic packaging sector, exposure to food segments hit by the home-working trend and rising demand for sustainable packaging, sources told Reorg. Read more here.

Discussing June 2021 covenants trends, our Americas Covenants by Reorg team analyzed the operation of unsub spinoff baskets with regards to “No Carve-Out” and “Full Carve-Out” versions and how some formulations could present risks for creditors. This covenants trends piece also takes a deep dive into the fact that some unsub spinoff baskets may provide illusory protection to noteholders against the use of investment capacity for dividends through cash spinoffs. 

---

Our experts discuss how the “Full Carve-Out” version from the unsub spinoff basket prevents all cash spinoff dividends protecting noteholders against a “cash spinoff” dividend in which the issuer uses the unsub spinoff basket to pay what is effectively a cash dividend. Along with that, our experts discuss the “Investments Carve-Out” version and how it prevents the use of investment capacity for dividends and the unsub spinoff basket in Univision notes provides limited protection to noteholders as well as the unsub spinoff basket in Univision’s senior secured notes due 2029 which provides limited protection to noteholders. Read the full June 2021 covenants trends piece here for our deep analysis on each of these situations: https://reorg.com/some-unsub-spinoff-baskets-may-provide-illusory-protection-to-noteholders-against-use-of-investment-capacity-for-dividends-through-cash-spinoffs/ 

Conducting a webinar discussing the Brazos restructuring situation, our Americas Core Credit experts will be taking a deep dive into the company’s financials on Wednesday, July 7, at 10 a.m. ET. Brazos is the only electric cooperative to file for bankruptcy after the Storm Uri disaster and related market dislocations, and the company did so in part to shield its member distribution cooperatives from immediate pass-through of Storm Uri charges. 

---

During the webinar, our coverage team will provide an overview of the Brazos Electric chapter 11 case, sources of uncertainty and outstanding issues, including available legislative tools, claim reconciliation and priority questions. We will also discuss potential restructuring paths for Brazos in light of these and other issues in the case, plus the team will conduct a Q&A session at the end of the webinar. Don’t miss out, register here: https://reorg.zoom.us/webinar/register/1316245464986/WN_FsKweVh0Rfy_7UfShKNa0g 

---

This webinar focused on the Brazos restructuring is a part 2 to our Texas Winter Storm webinar which was held in April 2021. You can view the replay of that webinar here: https://reorg.com/resources/webinars/texas-storm-webinar/ 

On the Reorg Americas team, we’ve seen a pickup in chapter 11 filings in the past few weeks. Notable new filers include mall REIT Washington Prime and SoftBank-backed tech-oriented construction company Katerra. Another new filer - Krygyz gold miner Kumptor - is bringing fascinating questions of international comity and the reach of bankruptcy court powers to Judge Judge Lisa G. Beckerman in New York. Reorg continues its expansion into municipals coverage, and there we’ve seen some recent chapter 9 filings from Western Community Energy and the Texas Student Housing Authority. Meanwhile the endgame for Puerto Rico’s long-running Title III proceedings is coming into view, with battle lines being drawn for a confirmation hearing, the timing of which is not pinned down but looks to be late this year. (more…)