UPDATE 1: GCL Revised Terms Supported by At Least Some Major Noteholders in Ad Hoc Group; Bonds Jump 8 Pts to 81/82

UPDATE 1: 5:42 a.m. ET 2/1/2021: The revised restructuring terms proposed by GCL New Energy are supported by at least some major noteholders in the company’s ad hoc group holding around 60% of the notes, including Argentem Creek which is said to have a blocking position, according to sources with knowledge of the situation. The now defaulted $500 million 7.1% senior notes due Jan. 30, 2021 jumped around eight points today to 81/82 after the improved terms were announced. Continue reading for our Asia Core Credit team's analysis of the revised restructuring terms proposed by  GCL New Energy and request a trial for access to our analysis and reporting on hundreds of other stressed, distressed and performing credit restructuring situations.

The terms were finalised over the weekend based on negotiations between the noteholder group and the company, the sources said.

A key improvement to the revised terms is that they now contain a stipulated mandatory early redemption or buyback of at least 50% of the new three-year notes by Jan. 30, 2023 as opposed to being completely conditional on an asset sale or receipt of government subsidies, two of the sources noted, who added that the early redemption or buyback is expected to be funded by further asset sales.

As reported, GCL New Energy previously told noteholders that it planned to sell 2GW of solar power plants this year for an expected net proceeds of RMB 7 billion and only retain around 0.8GW to 1GW of installed capacity after the planned disposals are closed by August.

Sources also noted that the company could potentially fund the early redemption through an equity sale after a successful fundraising by its Hong Kong-listed parent company GCL-Poly and Shenzhen-listed affiliate GCL System Integration Technology in the past month, which respectively raised HKD 4.2 billion ($543.4 million) and RMB 2.5 billion ($388.9 million) through share placements.

On top of a 5% cash consideration, the restructuring consideration includes the addition of a fixed instruction fee of $17.8 million to be paid to noteholders pro rata and an uptick of coupon rate under the proposed new three-year notes due Jan. 30, 2024, to 10% from the originally proposed 9.65%.

To implement the restructuring through a scheme of arrangement in Bermuda, the company requires the support of 50% of noteholders in number, representing 75% in value of those voting under the scheme.

The ad hoc group is advised by Houlihan Lokey and Hogan Lovells. Admiralty Harbour and Milbank are GCL New Energy’s financial and legal advisors.

 

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Original Story 10:02 p.m. UTC on Jan. 31, 2021

GCL Sweetens Restructuring Terms to Include $22.3M Cash Pool, Coupon Uptick to 10% From 9.65% Under New 3Y Notes, Mandatory Repurchase/Redemption of 15% in First Year, 35% in Second Year; New Terms Supported by 53% of Existing Notes