UPDATE 1: 12:37 a.m. ET 4/26/2024: Citicorp International Ltd., the trustee of China South City Holdings’ offshore notes, has sent a notice of acceleration on four tranches of USD notes that have yet to mature, according to three sources familiar with the matter.
The notes that have yet to mature are the restructured amortising outstanding $287 million 9% due June 2024s; $203 million 9% due October 2024s, $333 million 9% due December 2024s; and $227 million 4.5% due 2027s.
The Shenzhen-based wholesale shopping center and residential developer also has $289 million, 9% notes that came due April 12, after it already announced missing on Feb. 9 an $11.7 million mandatory redemption payment on the due October notes and Feb. 12’s $13 million coupon for the due April notes, as
reported.
The notes benefit from a keepwell deed provided by state-owned shareholder Shenzhen SEZ Construction & Development Group Co., which owns 29.3% of China South City.
The five outstanding tranches were extended in July 2022 as part of a consent solicitation process, the second by the company that year to push out USD bond maturities. It then tried to extend the maturities off all five tranches again in December 2023, but failed to get enough consents at least for four of the tranches.
Earlier this month, trustee Citicorp International Ltd. circulated notices to the respective holders of the 4.5% due 2027 and due 2024 senior notes, requesting that they disclose and block their positions in the clearing systems, which is one of the steps before legal action can be taken, as
reported.
China South City announced on March 11 that, by then, HKD 25.329 billion ($3.239 billion) of its total borrowing has been defaulted on or was covered by a cross default trigger had been breached.
The company did not respond for comment.
Original Story 6:27 a.m. UTC on April 16, 2024
China South City USD Bonds Trustee Circulates Notices Requesting Holders to Disclose, Block Positions; Likely Precursor to AHG Legal Action
The trustee of China South City Holdings’ 4.5% due 2027 and 9% due 2024 senior notes circulated notices to the respective holders requesting that they disclose and block their positions in the clearing systems, according to copies of the notices dated April 10 seen by Reorg.
While the bondholder notices – the first circulated by Citicorp International Ltd. since China South City, or CSC, defaulted on its offshore notes in February – don’t specify the purpose of blocking the notes, two holder sources said the request is likely a precursor to potential legal action at the behest of the bondholder ad hoc group, or AHG.
Supporting the AHG’s efforts to take to the battle to CSC is a keepwell for all of its $1.347 billion bonds provided by state-owned 29.3% shareholder Shenzhen SEZ Construction & Development Group Co., or SZCDG.
The AHG has been battling CSC since it emerged with a consent solicitation in December 2023 to extend the already restructured $1.347 billion bonds across five tranches. Ultimately, the holder group
had enough votes to scuttle the consent for four of the tranches, and
contends that the process for the fifth – 9% notes due July 2024 – also failed since the offer terms ostensibly bound together the outcome for all.
For its part, CSC
announced on Dec. 20 that the consent for the due July notes was successful.
Regardless, CSC missed an $11.7 million mandatory redemption payment due Feb. 9 on its $203 million 9% due October 2024 notes and a $13 million coupon due Feb. 12 under its $289 million 9% due April 2024 notes, as
reported.
The company said in a March 11
announcement that the missed payment triggered cross default protection on other debt, and that “HKD 25.329 billion ($3.23 billion) of the company’s total borrowing has been defaulted or cross defaulted.”
CSC said in the Feb. 9
announcement that it is considering different options including consent solicitation, schemes and exchange offers.
Since the default or cross-default of the company, the trustee has not sent out a default notice notifying the respective bondholders, said the first two and a third bondholder source.
As per the trustee notices, a corporate action event will be set up by Euroclear and Clearstream to enable participants to send electronic instructions to effect the blocking, which could be undone with the trustee’s consent.
China South City and Citicorp did not respond to emails requesting for comment.