Fri 06/10/2022 05:04 AM
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UPDATE 1: 5:04 a.m. ET 6/10/2022: Shimao Group faces the imminent maturity of a $400 million private placement facility due Tuesday, June 14, whereby a nonpayment may trigger a failure-to-pay credit event under its credit default swaps (CDS), according to two sources familiar with the matter. The existence of the private facility, which has so far been undisclosed, will likely complicate the developer’s ongoing offshore debt restructuring.

Continue reading for more actionable insights on Shimao Group's imminent maturity and offshore debt restructuring, and request a trial to access more from Reorg's Asia Core Credit team. 

The $400 million facility is held by JP Morgan, which has also taken out CDS on the facility, according to the same sources. JP Morgan and Shimao are in contact about resolving the payment, sources said. If a failure-to-pay credit event is found to have occurred under the CDS, Shimao would have to settle with JP Morgan, independent of the restructuring plan that Shimao has been working on with other offshore debt holders, the same sources said.

Reorg’s analysis shows that Shimao Group is one of the main reference entities amongst a select group of developers in terms of notional amount of CDS trades in the last two years.

JP Morgan and Shimao Group declined to comment.

Restructuring Proposal

The developer has to reach an agreement with offshore creditors on details of the restructuring plan by July 3 when its $1 billion 4.75% notes are due. For the broader restructuring plan to work, the company has to convince lenders of its syndicated loans on a revised plan to defer payments on three loans totalling $3.32 billion originally due between 2022 and 2025 all to 2024 and 2025 with no payments in 2022 and 2023.

The revised plan, which sources said the company communicated to lenders earlier in June, is a major walkback from a previous version lenders had approved, whereby Shimao would pay 10%, 20%, 30% and 40% of the $1.2 billion due 2022 amortizations in 2022, 2023, 2024 and 2025. As reported, the Chinese developer has since sought to change the installment plan, citing difficulties in cash collection caused by the Covid-19 lockdown in Shanghai, which has since been lifted in a phased manner.

The lenders are displeased with the proposed revision with some demanding payments in 2022 and 2023 and others requesting even better terms than the previous 10%-20%-30%-40% plan, the sources said. The lenders have signed a standstill agreement through July 3 while negotiations continue.

Once an agreement is reached with the syndicated loan lenders, Shimao plans to leverage the lenders’ approval to convince other creditors including holders of the $1 billion due July 3 notes and GIC, holder of $700 million private notes originally due April, to agree to a similar repayment schedule.

See Reorg’s tear sheet on Shimao Group HERE and an analysis on the convoluted RMB 5.7 billion Citic Trust loan involving the Shenzhen Longgang project HERE.


Original Story 8:56 a.m. UTC on May 18, 2022

Shimao Group Mulls Revision of Offshore Debt Extension Plan Amid Worsened Cash Collection During Covid Lockdowns, Seeks to Lower Total Payments in 2022; Extension Affects $1B Due July Notes, $700M Private Notes Held by GIC, $1.2B Syndicated Loan Amortization Payment

Shimao Group is seeking to revise the installment payment schedule of a proposed four-year extension plan for its outstanding offshore obligations due 2022 including $1.2 billion syndicated loan amortization payment, $1 billion 4.75% senior notes due July 3 and $700 million private notes held by Singapore sovereign fund GIC, said two sources familiar with the matter.

The Chinese real estate developer aims to lower total payment in 2022, leaving more to be repaid later, the sources said.

The contemplated changes were prompted by Shimao’s worsened liquidity in April as cash collection dwindled amid Covid-related lockdowns on the mainland, making it difficult for the company to fulfill its 10% installment payment in 2022 under the original extension plan, according to the sources.

Shimao, advised by Admiralty Harbour, is negotiating with creditors on the proposed revision, the sources said. The company intends to keep the four-year timetable intact while adjusting the payment schedule, which according to the sources, has met with backlash from creditors who are concerned about the increased uncertainty that an even more lopsided schedule entails.

The company agreed in April with offshore syndicated loan lenders to extend four amortization payments due 2022 totaling $1.2 billion for four years, with 10%, 20%, 30% and 40% repaid in 2022, 2023, 2024 and 2025, respectively. Aiming to treat its offshore creditors equally, Shimao applied the same 10%-20%-30%-40% payment schedule for its other due 2022 debt including public and private notes.

As reported, Shimao started extension talks with the syndicated loan lenders in January, and the banks requested a more holistic restructuring plan to include its other offshore debt including USD bonds.

For the $700 million private notes held by GIC, after missing the original payment due in April, Shimao has since reached a standstill agreement with GIC through the end of June, according to sources.

Meanwhile, Singapore-based Oversea-Chinese Banking Corp. Ltd. has withdrawn its debt claim against Shimao in Hong Kong demanding a $49.4 million outstanding payment on its $100 million revolving credit facility, the sources said. As part of the settlement, OCBC agreed to withdraw the lawsuit, and Shimao agreed to pay the bank’s legal costs and include the outstanding payment owed to the bank in its offshore restructuring plans.

Onshore, Shimao is seeking to delay payment originally due this year. The company’s subsidiary Shanghai Shimao Co. Ltd. is currently trying to persuade investors of its outstanding RMB 475 million ($70.5 million) 4.15% corporate bond “19 Shanghai Shimao G3” due May 22 to extend the maturity for a full year offering no upfront payment of principal and no coupon adjustment during the extension.

In early April during a meeting with investors of RMB 500 million 3.7% private placement notes originally putable April 26 “20 Shanghai Shimao PPN002,” the company said it was only able to pay 10% of the principal, which it said represented the best plan the company would ever be able to offer for onshore debt repayment. Investors eventually approved the 10% upfront payment and a one-year extension of the notes.

For an RMB 5.679 billion Longgang trust loan with CITIC Trust, Shimao has stopped making payments since April 18, in breach of repayment obligations under an observation period for the trust loan.

In April, Shimao Group reported RMB 6.03 billion unaudited contracted sales, down 76.1% from the April 2021 level. For the first four months of 2022, the company saw its aggregated contracted sales decrease 70% year over year to RMB 28.15 billion.

Shimao, GIC and OCBC did not respond to requests for comments.
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