Reorg Blog

Discussing the cruise shutdown litigation situation between the CDC and 3 states including Florida, Alaska and Texas, our Americas Core Credit experts dive deep into the Conditional Sailing Order, or CSO, where states are comparing the cruise shutdown to a ban on all ‘sexual intercourse’. Our Americas Core Credit team also discusses the mandatory limits for cruises being lifted on July 18th absent further ‘scientific evidence’. The CSO and related orders will become “non-binding,” according to direction from Judge Merryday, like CDC Covid-19 “guidance” aimed at other similar industries including the airline, railroad and hotel industries. The cruising halt caused major financial complications for the state of Florida as well as residents of the state including the necessity of approximately $20M in unemployment benefits to cruise industry workers, the loss of over $100M in income for the state’s ports and a loss of approximately $82M in sales tax revenue.

---

To read our Americas Core Credit team’s full analysis of the cruise shutdown litigation click through here: https://reorg.com/cruise-litigation-coverage/

Another exclusive from our Asia Core Credit team is about Chinese property developers resorting to lightly-regulated private bond issuance to circumvent China’s “three red lines” policy. For Greenland, which has strong ties with the Shanghai municipal government, to try to tap private investors and then pull the deal due to high cost, shows the market is tight with riskier borrowers. The team also covered last week Yuzhou Group’s attempted private deal. Click through to read more on this industry trend in the onshore real estate market: https://reorg.com/greenland-holdings-sounds-out-private-bond-deal/

On this week’s Americas Core Credit weekly podcast our expert team of covenants analysts, including Richard Barbour and Julian Bulaon, discuss Iconix Brands going private acquisition in detail.  Iconix Brands’ recently announced going private acquisition by Lancer Capital and the change of control implications under their debt docs is being structured as a two step merger. In broad strokes, the purchaser commences a tender offer to acquire all outstanding shares of Iconix’s common stock, and in this case that’s for $3.15 per share in cash. Assuming that the shares that are tendered in the offer and those held by the company constitute a majority, the remaining shares are acquired in a backed-in merger at the same cash price as the initial tender offer. The Iconix Brands going private acquisition, in terms of the shareholder vote, is implicitly the same as the initial tender offer in this case. 

---

Click through to listen to the full podcast on Spotify, iTunes or SoundCloud for our discussion between Reorg Covenants analysts Julian Bulaon and Richard Barbour on Iconix Brands, including their recently announced going-private acquisition by Lancer Capital and the change of control implications under their debt docs as well as our viewpoints on Washington Prime Group, Mallinckrodt, Dawn Acquisitions, and Puerto Rico.

Staggering amounts of maturing debt owed by Chinese borrowers are common headlines for generalist newswires. But those numbers do not include off-balance-sheet borrowings and other liabilities, which increasingly exasperate investors, and increase volatility in Chinese issuers’ bonds. Yuzhou Group recently sounded out market interest in a third private bond deal in recent months. As Reorg revealed, the last private issue - a $100 million 6% 361-day issue priced at 98.12% in September - was marketed with an ISIN code and a private page on Bloomberg. The issuer was a BVI-incorporated SPV. These off-balance sheet deals create volatility in bond prices - despite company denials - due to concerns about significant exposure to non-controlling interests. Onshore, problems caused by non-standard debt such as trust loans and leasing liabilities loom large. China Fortune Land Development, one of the most high-profile defaults by Chinese corporate borrowers to date, had received roughly RMB 40 billion ($6.189 billion) non-standard debt from Ping An Life Insurance, its second-largest shareholder and largest creditor, via various trust companies, as we reported. Sign up for weekly updates here

Analyzing the Red Star Macalline Group debt, our Asia Core Credit team took a deep dive into the company’s plans for the future after the company held an on-site investor event on June 9, 2021. The event gave great insight into the company’s plans to lower interest-bearing debt by RMB 10B within three years, plus the Red Star Macalline Group debt has given the company reason to repay their corporate bonds with their own cash resources or proceeds from A-share private placement if the company receives the proceeds by then. Red Star Macalline does not have any onshore issuance plan for 2021, but they do have RMB 5.5 billion onshore issuance quota left which expires in late 2022. Furthermore, The Red Star Macalline Group debt has created plans for the company to repay two onshore bonds maturing or putable in July with cash on hand.

---

To read our Asia Core Credit team’s full analysis of the Red Star Macalline Group debt situation as well as view the company’s full capital structure, click through here: https://reorg.com/red-star-macalline-group-interest-bearing-debt/