Tus-Holdings
Tus Offshore Notes Rally Over 15 Points on RMB 5.3B Share Placement to Hefei, Qingdao Govt-Owned Entities; Potential CoC Considerations Subject to Interpretation
Wed 12/02/2020 07:24 AM
Relevant Documents:
Share Placement
Closing of Share Sale
Offering Memorandum June 10, 2019
Continue reading for the Asia Core Credit team's analysis on Tus-Holding's financial restructuring, and request a trial to access reporting and analysis of hundreds of other stressed, distressed and performing credits.
The offshore notes of Tsinghua University-linked science park developer Tus-Holdings have rallied 15 to 20 points across the curve after it announced yesterday, Dec. 1, that its troubled controlling shareholder, Tsinghua Holdings, had closed the sale of a 14.8% stake to state-owned firm Hefei Construction Investment Holdings, while Tus will also issue new shares to Hefei Construction and two other state-owned investors for RMB 5.28 billion ($804.4 million).
The company’s maturing $350 million 7.9% senior notes due March 7, 2021 jumped over 15 points to 75/80 on the news, while the long-end $400 million 6.95% senior notes due June 18, 2022 were indicated at 56/61 today, Dec. 2.
Buysiders noted that bond prices were buoyed by investors’ expectation that Tus would be able to use some of the share placement proceeds to repay its offshore notes totalling $750 million maturing in March and August, although the company has so far provided little guidance on when the share placement will be completed or its use of proceeds.
As reported, Tus-Holdings will issue 255.7 million new shares in Tus-Holdings to Hefei Construction Investment and its concerted party Hefei City Shushan District Urban Construction Investment (蜀山城投), and Qingdao Hongjing Zhigu Technological Innovation Fund Management (红景智谷).
Both Hefei Construction Investment and Shushan Construction Investment are controlled by the Hefei municipal government, while Hongjing Zhigu is an investment vehicle controlled by Qingdao State-owned Assets Supervision and Administration Commission, or Qingdao SASAC, according to corporate records.
Following the share placement, former largest shareholder Tsinghua Holdings, Tus chairman Wang Jiwu’s China Private Ventures, and Hefei Construction Investment and its concerted party will each hold a 22.2% stake in Tus-Holdings, while Hongjing Zhigu will hold 14.8%, according to the announcement.
Tus-Holdings said in a meeting with government officials from Shushan District, Hefei held yesterday that the company will develop a technology park project in Shushan as part of a strategic investment agreement reached with the Hefei municipal government, Tus said in a press release posted on its WeChat account today.
The introduction of Hefei Construction as a new shareholder and the following share placement mark the completion of a three-year long reform aimed at separating universities from their affiliated businesses, Tus said in another announcement.
Potential Change-of-Control Consideration?
The share sale and placement, upon completion, may lead noteholders to consider the change-of-control provisions under the offshore notes, in particular around whether the revised shareholdings and new shareholders meet the requirements as set out in the respective preliminary offering memorandums.
According to Reorg’s analysis of the OMs for the offshore notes, the OMs all broadly contain the same change-of-control redemption provisions. If triggered, these would enable noteholders to require the issuer to redeem the notes at 101%.
As detailed above, following the share placement, Tsinghua Holdings will hold 22.2% of Tus-Holdings.
The provisions detail that in the event Tsinghua Holdings Co. Ltd. ceases to directly hold or own at least 44.92% of the issued share capital of Tus-Holdings Co. Ltd. a change of control occurs, while one of five separate potential triggers are tripped.
One of these triggers applies if Tsinghua Holdings and any “PRC Government Person(s)” cease to directly or indirectly, hold or own in aggregate at least 51% of the issued share capital of Tus-Holdings.
“PRC Government Person(s)” is defined in the OMs as the central government of the PRC, the Beijing Municipality government, the Shanghai Municipality government, the Hebei provincial government, the Guangdong provincial government, or any entity directly or indirectly controlled by one of these governments.
Once the share placement is completed, Tsinghua Holdings, Qingdao government-owned Hongjing Zhigu and the two Hefei government-owned companies will collectively hold over 59% of Tus.
However, sources noted that it is debatable whether the new shareholders strictly qualify as “PRC Government Person(s)” as defined in the OMs, while Tsinghua and Hebei Construction currently collectively hold about 44.9% following the closing the share sale and before the share placement is completed, falling below the 51% government ownership requirement.
Below is the capital structure of Tus-Holdings:
Share Placement
Closing of Share Sale
Offering Memorandum June 10, 2019
Continue reading for the Asia Core Credit team's analysis on Tus-Holding's financial restructuring, and request a trial to access reporting and analysis of hundreds of other stressed, distressed and performing credits.
The offshore notes of Tsinghua University-linked science park developer Tus-Holdings have rallied 15 to 20 points across the curve after it announced yesterday, Dec. 1, that its troubled controlling shareholder, Tsinghua Holdings, had closed the sale of a 14.8% stake to state-owned firm Hefei Construction Investment Holdings, while Tus will also issue new shares to Hefei Construction and two other state-owned investors for RMB 5.28 billion ($804.4 million).
The company’s maturing $350 million 7.9% senior notes due March 7, 2021 jumped over 15 points to 75/80 on the news, while the long-end $400 million 6.95% senior notes due June 18, 2022 were indicated at 56/61 today, Dec. 2.
Buysiders noted that bond prices were buoyed by investors’ expectation that Tus would be able to use some of the share placement proceeds to repay its offshore notes totalling $750 million maturing in March and August, although the company has so far provided little guidance on when the share placement will be completed or its use of proceeds.
As reported, Tus-Holdings will issue 255.7 million new shares in Tus-Holdings to Hefei Construction Investment and its concerted party Hefei City Shushan District Urban Construction Investment (蜀山城投), and Qingdao Hongjing Zhigu Technological Innovation Fund Management (红景智谷).
Both Hefei Construction Investment and Shushan Construction Investment are controlled by the Hefei municipal government, while Hongjing Zhigu is an investment vehicle controlled by Qingdao State-owned Assets Supervision and Administration Commission, or Qingdao SASAC, according to corporate records.
Following the share placement, former largest shareholder Tsinghua Holdings, Tus chairman Wang Jiwu’s China Private Ventures, and Hefei Construction Investment and its concerted party will each hold a 22.2% stake in Tus-Holdings, while Hongjing Zhigu will hold 14.8%, according to the announcement.
Tus-Holdings said in a meeting with government officials from Shushan District, Hefei held yesterday that the company will develop a technology park project in Shushan as part of a strategic investment agreement reached with the Hefei municipal government, Tus said in a press release posted on its WeChat account today.
The introduction of Hefei Construction as a new shareholder and the following share placement mark the completion of a three-year long reform aimed at separating universities from their affiliated businesses, Tus said in another announcement.
Potential Change-of-Control Consideration?
The share sale and placement, upon completion, may lead noteholders to consider the change-of-control provisions under the offshore notes, in particular around whether the revised shareholdings and new shareholders meet the requirements as set out in the respective preliminary offering memorandums.
According to Reorg’s analysis of the OMs for the offshore notes, the OMs all broadly contain the same change-of-control redemption provisions. If triggered, these would enable noteholders to require the issuer to redeem the notes at 101%.
As detailed above, following the share placement, Tsinghua Holdings will hold 22.2% of Tus-Holdings.
The provisions detail that in the event Tsinghua Holdings Co. Ltd. ceases to directly hold or own at least 44.92% of the issued share capital of Tus-Holdings Co. Ltd. a change of control occurs, while one of five separate potential triggers are tripped.
One of these triggers applies if Tsinghua Holdings and any “PRC Government Person(s)” cease to directly or indirectly, hold or own in aggregate at least 51% of the issued share capital of Tus-Holdings.
“PRC Government Person(s)” is defined in the OMs as the central government of the PRC, the Beijing Municipality government, the Shanghai Municipality government, the Hebei provincial government, the Guangdong provincial government, or any entity directly or indirectly controlled by one of these governments.
Once the share placement is completed, Tsinghua Holdings, Qingdao government-owned Hongjing Zhigu and the two Hefei government-owned companies will collectively hold over 59% of Tus.
However, sources noted that it is debatable whether the new shareholders strictly qualify as “PRC Government Person(s)” as defined in the OMs, while Tsinghua and Hebei Construction currently collectively hold about 44.9% following the closing the share sale and before the share placement is completed, falling below the 51% government ownership requirement.
Below is the capital structure of Tus-Holdings:
Click HERE to enlarge
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