Yuzhou launches exchange offer for two US dollar bonds, consent solicitation for 12 others
Published 13 January 2022, 10:41:16 am
HONG KONG, Jan 13 (IFR) - Chinese property developer Yuzhou Group Holdings has launched an exchange offer to extend by one year the maturity of two US dollar bonds due this month, in order to avoid an outright default, as well as consent solicitation for its remaining 12 dollar bonds to avoid cross-acceleration.
It is proposing to exchange the US$340m 6% notes due January 25 and US$242.069m 8.625% notes due January 23. The 12 bonds under the consent solicitation have a total outstanding amount of US$4.9155bn with maturities ranging from 2022 to 2027.
Like many of its peers, Yuzhou said it is under pressure to generate sufficient cashflows to meet its debt obligations due to the severe difficulties of the property sector. It warned that it will not have sufficient funds to repay the two January bonds if bondholders do not accept the exchange.
Yuzhou also expects to delay the coupon payments on its dollar bonds due between January 13 and February 26, totalling US$110m. It said it will make every effort to pay any missed coupon within the 30-day grace period.
For each US$1,000 in principal amount, holders of the 6% 2022s and 8.625% 2022s are being offered US$50 of upfront principal payment in cash, US$10 in cash as incentive cash consideration, and US$950 in new notes to be issued. The new notes carry a coupon of 7.8125% and will mature on January 21 2023. The minimum threshold for the completion for the exchange offer is 90% of each of the two bonds.
The deadline is January 19 and settlement is expected on or about January 20.
Research firm Lucror Analytics expects the majority of bondholders to accept the exchange given the one-year extension without haircut. It expects the company to sell more assets to raise cash.
Yuzhou is also soliciting consent to amend the events of default provisions in each of the other 12 bonds and obtain certain waivers of defaults to avoid cross-acceleration and final judgment events of defaults under the 6% 2022s and 8.625% 2022s.
Even if the Hong Kong-listed company receives consent from the holders of the notes, its existing bank facilities and other debt obligations may also have event of default provisions that provide for cross-acceleration as a result of the non-payment of the 6% 2022s and 8.625% 2022s. It therefore intends to communicate with each of its other creditors to seek waivers and/or amendments.
The developer will pay US$2.50 as consent fee per US$1,000 principal amount. The deadline is also January 19.
The exchange offer and consent solicitation are not conditional upon each other.
Yuzhou said it has deposited US$50m into a designated bank account and will deposit more before the expiration deadline for the cash payment under the exchange offer and consent solicitation.
BOC International and Haitong International are joint dealer managers and solicitation agents. Morrow Sodali is information, tabulation and exchange agent.
By Carol Chan