Tue 05/17/2022 06:31 AM
Share this article:
Yuzhou Group Holdings Co. Ltd. is considering restructuring its offshore bonds via a scheme of arrangement as part of a holistic solution to its overall debt, to be executed by the fourth quarter of 2022, according to three sources familiar with the matter.

Yuzhou announced on May 14, with specific reference to its offshore debt, that its financial advisors - Alvarez & Marsal Corporate Finance (A&M), BOCI Asia, and Haitong International - had established contact and initiated discussions with over 100 offshore bondholders, and that it intends to provide offshore creditors and other stakeholders with a proposal which would “treat all offshore creditors fairly according to their respective positions in the capital structure” of the company.

The same announcement added that Yuzhou was aware of the difficulties in amending New York law governed bond terms and that it would work with its financial and legal advisors to implement a consensual amendment of its offshore liabilities, as appropriate.

A&M, which has been appointed as an additional financial advisor to the company, will need about two months to complete due diligence, which will evaluate the company’s liquidity, cash flow and asset position, before putting out specific terms of any restructuring arrangement, the sources said.

The market has seen a flood of liability management exercises (LMEs) ever since China Evergrande defaulted on its debts and market conditions for Chinese property developers have trended downward, as Reorg has reported. These LMEs have been structured in various ways, including using consent solicitations, exchange offers for single tranches of indebtedness as well as a combination of both with accompanying exit consents applicable to multiple tranches of indebtedness, as also reported.

See Reorg’s comparison analysis of LMEs for various Chinese property developers HERE and HERE to view some of the different structures and terms that have been deployed.

As Reorg has also previously highlighted, a recent market trend is the downward erosion of the money term amendment threshold. Proposed exchange notes often include a 75% threshold, which is a significant decrease from the usual unanimous money term amendment threshold contained in existing New York governed notes which are subject to exchanges.

Onshore Repayments

Yuzhou on March 8 had requested a halt in trading in its 8.5% $500 million senior notes due 2023 (the 2023 II Notes), following failure to pay a $21.5 million coupon on the notes within a 30 day grace period commencing Feb. 4.

Subsequently, on March 31 the company announced that Yuzhou Group and Grand Keen Investment Holding Ltd. had terminated an exchange offer on three series of private notes and the concurrent consent solicitation in respect of one of the three series, as it was exploring options for a holistic solution to its offshore obligations. A day later, on April 1, Yuzhou Group announced the appointments of BOCI and Haitong as financial advisors, with Linklaters as legal advisors.

Despite failing to cure the $21.3 million coupon payment originally due Feb. 4 on the 8.5% senior notes due 2023, Yuzhou’s onshore subsidiary Xiamen Yuzhou Hongtu Real Estate Co., had earlier repaid and avoided default on its onshore bonds, in order to ensure the company’s onshore entity remains safe from lenders’ potential enforcement action, allowing it to continue generating cash flows to make future debt repayments, said two buysiders.

As Yuzhou stated in its May 14 announcement, “Regarding certain onshore securities that recently became or would have become payable, the Company has successfully resolved and avoided default so that its business operation would not be materially or adversely impacted.”

Xiamen Yuzhou remitted funding for the redemption of RMB 1.497 billion ($220.9 million) of the RMB 1.5 billion 7.5% bond put back to the company, “19 Yuzhou 02”, due on April 29. Yuzhou told investors that it had negotiated deals with certain state-owned investors to repurchase the putable bond, while the relevant government department had led the coordination between the company and the potential investors, as reported.

The company proposed to resell the putable bond to the SOE investors, which will become the only creditors of the bond. The bond could be extended for one year, as reported.

Yuzhou in its May 14 announcement confirmed that the refinancing of this debt was completed with the support of the local government, adding that, also in April 2022, the same onshore subsidiary had made a scheduled payment under its RMB 1.043 billion asset-backed securities which were backed by the cash receivables of property sales.

Yuzhou and A&M declined to comment.

Below is Yuzhou Group’s capital structure:
 
Yuzhou Group Holdings - Pro Forma as of 01/12/2022
 
06/30/2021
 
EBITDA Multiple
(CNY in Millions)
Amount
US$ Amt.
Maturity
Rate
Book
 
Bank Loans
14,524.5
2,234.5
 
 
 
Other Borrowings 1
2,221.4
341.8
 
 
 
Total Bank Loans & Other Borrowings
16,745.9
2,576.3
 
2.3x
20 Haitian 1A
750.0
115.4
Jul-14-2022
5.280%
 
20 Haitian 1B
240.0
36.9
Jul-14-2022
6.000%
 
20 Haitian 1C
53.0
8.2
Jul-14-2022
-
 
Total Onshore ABNs
1,043.0
160.5
 
2.5x
19 Yuzhou 01 2
2,000.0
307.7
Apr-03-2024
6.980%
 
19 Yuzhou 02 2
1,500.0
230.8
Apr-03-2024
7.500%
 
20 Yuzhou 01 3
1,500.0
230.8
Jul-24-2025
6.500%
 
20 Yuzhou 02 4
1,500.0
230.8
Sep-15-2025
6.500%
 
Total Onshore Bonds
6,500.0
1,000.0
 
3.4x
$30.5M 8.625% Senior Notes Due 2022 5
198.3
30.5
Jan-23-2022
8.625%
 
$74.3M 6% Senior Notes Due 2022 5
483.2
74.3
Jan-25-2022
6.000%
 
$100M 12% Senior Notes Due 2022
650.0
100.0
Jun-30-2022
12.000%
 
$115M 8.5% Senior Notes Due 2022
747.5
115.0
Sep-22-2022
8.500%
 
$453.4M 7.8125% Senior Notes Due 2023 6
2,946.8
453.4
Jan-23-2023
7.813%
 
$500M 8.5% Senior Notes Due 2023
3,250.0
500.0
Feb-04-2023
8.500%
 
$179M 9.95% Green Senior Notes Due 2023
1,163.5
179.0
Jun-08-2023
9.950%
 
$650M 6% Senior Notes Due 2023
4,225.0
650.0
Oct-25-2023
6.000%
 
$500M 8.5% Senior Notes Due 2024
3,250.0
500.0
Feb-26-2024
8.500%
 
$497M 8.375% Senior Notes Due 2024
3,230.5
497.0
Oct-30-2024
8.375%
 
$400M 7.700% Senior Notes Due 2025
2,600.0
400.0
Feb-20-2025
7.700%
 
$486M 8.3% Senior Notes Due 2025
3,159.0
486.0
May-27-2025
8.300%
 
$636.5M 7.375% Senior Notes Due 2026
4,137.3
636.5
Jan-13-2026
7.375%
 
$295M 7.875% Senior Notes Due 2026
1,917.5
295.0
Aug-12-2026
7.875%
 
$557M 6.35% Senior Notes Due 2027
3,620.5
557.0
Jan-13-2027
6.350%
 
Total Offshore Bonds
35,579.1
5,473.7
 
8.3x
$300M 5.375% Perpetual Notes 7
1,950.0
300.0
 
5.375%
 
Total Offshore Perpetuals
1,950.0
300.0
 
8.6x
Total Debt
61,818.0
9,510.5
 
8.6x
Less: Cash and Equivalents
(20,943.7)
(3,222.1)
 
Net Debt
40,874.3
6,288.4
 
5.7x
Operating Metrics
US$ Amt.
LTM Reorg EBITDA
7,173.7
1,103.6
 
 
Liquidity
Plus: Cash and Equivalents
20,943.7
3,222.1
 
Total Liquidity
20,943.7
3,222.1
 
Credit Metrics
Gross Leverage
8.6x
 
Net Leverage
5.7x
 

Notes:
Sources: Company filings, Wind, Reorg
1. Excluding onshore ABNs issued by property management subsidiary
2. Next put, reset date on Apr 6, 2022
3. Next put, reset date on July 25, 2022
4. Next put, reset date on Sep 15, 2022
5. Remaining notes that did not participate in Jan'22 exchange offer
6. New notes issued under Jan'22 exchange offer
7. Callable on Sep 29, 2022
US$ Translation: CNY/USD rate used for USD conversion is 6.5.
Share this article:
This article is an example of the content you may receive if you subscribe to a product of Reorg Research, Inc. or one of its affiliates (collectively, “Reorg”). The information contained herein should not be construed as legal, investment, accounting or other professional services advice on any subject. Reorg, its affiliates, officers, directors, partners and employees expressly disclaim all liability in respect to actions taken or not taken based on any or all the contents of this publication. Copyright © 2022 Reorg Research, Inc. All rights reserved.
Thank you for signing up
for Reorg on the Record!