China South City
UPDATE 11: China South City Remits Funds to Repay 4% Principal Amortization Under July 2024 Notes
Fri 02/02/2024 04:18 AM
UPDATE 11: 4:18 a.m. ET 2/2/2024: China South City has remitted funds to repay the 4% principal of amortization under its outstanding $235 million USD notes originally due July 2024, according to a source familiar with the matter and a company spokesperson.
Under the December 2023 consent solicitation, holders of the due July notes agreed to the company’s proposal to extend the notes’ maturity by 37 months to Aug. 19, 2027 via amortization payments with 4% of principal to be paid on Jan. 31, 2024, as reported.
China South City launched a consent solicitation on Dec. 4, 2023 proposing to extend the maturities of its five offshore USD notes for 33 to 39 months but only managed to obtain the requisite consents for its 9% notes due July 2024 which have now been extended to 2027, according to the company’s Dec. 20 announcement.
Consenting holders of the originally due July notes also agreed to waive the default after the company failed to make a due November interest payment and agreed for the coupon to be paid by July 19. The consent solicitation failed on the remaining four tranches, as reported.
The company had earlier remitted funds to cure a missed $12.9 million coupon, originally due Dec. 26, 2023, under its $287.2 million 9% notes due June 26, 2024, as reported.
UPDATE 10: China South City Remits Funds to Pay Missed Coupon on $287M Notes Due June 26; Notes Up 15 Pts in January to 44
UPDATE 10: 3:01 a.m. ET 1/26/2024: China South City has remitted funds to cure a missed coupon under its outstanding $287.2 million 9% notes due June 26, 2024, according to two sources familiar with the matter.
One holder of the due June notes told Reorg that the coupon payment was received as of Thursday night, Jan. 25.
As reported, the $12.9 million interest payment was originally due Dec. 26, 2023. Under the terms of the indenture, China South City has a 30-day grace period until Jan. 25 to make the interest payment.
The due June notes were indicated around 44 today, up about 15 points from the high 20s in early January, according to two buysiders.
In December, China South City launched a consent solicitation to extend its five offshore USD notes including the 9% due June notes. However, the company only managed to obtain requisite consents to extend and amend the terms of the 9% due July notes; terms of the remaining four series, including the due June notes, were not amended. As a result of the consent solicitation, an interest payment on the due July notes originally due November 2023 was postponed to be paid before July, 19, 2024, as reported.
China South City said in the Dec. 20 announcement that it is communicating with holders to discuss debt management strategies and that should any further enhancements or more favorable terms be offered in the future to holders of the remaining four tranches, the company will offer equivalent terms to the due July 2024 noteholders.
China South City did not respond to requests for comment.
UPDATE 9: China South City Plans to Cure Missed Coupon on $287M Notes Due June 26; Notes Up 10 Pts in January to 42/44
UPDATE 9: 5:09 a.m. ET 1/19/2024: China South City told certain investors that it plans to pay a missed coupon on its outstanding $287.2 million 9% notes due June 26, 2024 within a 30-day grace period, according to two sources familiar with the matter.
The coupon payment - totalling about $12.9 million - was originally due Dec. 26, 2023 and has a 30-day grace period that will end next week, said the sources.
China South City’s USD notes have been rising throughout January, with its due June notes up over 10 points to be indicated around 42/44 today, Jan. 19 from the high 20s level in early January, according to two buysiders.
China South City launched a consent solicitation on Dec. 4, 2023 proposing to extend the maturities of its five offshore USD notes for 33 to 39 months but only managed to obtain the requisite consents for its 9% notes due July 2024 which have now been extended to 2027, according to the company’s Dec. 20 announcement.
Under the consent solicitation, consenting holders of the originally due July notes also agreed to waive the default after the company failed to make a due November interest payment and agreed for the coupon to be paid by July 19. The consent solicitation failed on the remaining four tranches, as reported.
China South City said in a notice dated Dec. 19 to its USD bondholders that the company had received requisite consents in respect of the 9% due July 2024 notes as of the further extended expiration date, and it has decided to waive the condition of inter-conditionality, as reported.
In the Dec. 20 announcement, the company said it has been engaging with holders to discuss debt management strategies, including but not limited to consent solicitation, schemes and exchange offers, as part of its ongoing efforts to manage its liquidity, adding that it will offer equivalent terms to the due July 2024 noteholders if there is any further enhancements to be offered to the rest four notes.
An ad hoc group, or AHG, of holders of its offshore USD notes has disputed the company’s representations in its Dec. 20 announcement, in a letter sent to the company’s counsel Linklaters from the AHG counsel Kirkland & Ellis. The letter disputes that the company has secured requisite consents from holders of the 9% notes due July 2024 to implement amendments to the notes indenture, as reported.
China South City declined to comment.
UPDATE 8: China South City AHG’s Legal Counsel Sends Letter to Co. Disputing Requisite Consents Secured to Amend 9% Senior Notes Due July 2024; States Co. Breached Terms of Consent Solicitation, Disputes Right to Waive Condition of Inter-Conditionality
Editor’s Note: The following story was originally published on Dec. 26. It has been reissued to reach a wider audience.
UPDATE 8: 2:21 a.m. ET 12/26/2023: Kirkland & Ellis, as legal counsel to an ad hoc group, or AHG, or holders of China South City Holdings Ltd.’s offshore USD notes sent a letter on or around Dec. 22 to Linklaters, legal counsel to the company, stating that the AHG disputes the company’s representations in its Dec. 20 announcement that it has secured requisite consents from holders of its 9% senior notes due July 2024 to implement amendments to the notes indenture, according to two sources with knowledge of the matter.
According to the letter, the company has not obtained valid consents from requisite holders of the July 2024 notes to satisfy the requirements related to amendments with the consent of holders contained in the July 2024 notes indenture, to effect any amendments to the July 2024 notes, or any waiver of the coupon payments due and payable under the bonds, the sources said. The reasoning behind the statement are set out in the letter sent to Linklaters (more below), according to the sources.
The AHG includes beneficial holders of, among other tranches, the 9% senior notes due July 2024, the sources noted. China South City had announced on Dec. 20, that as of Dec. 18 at 4:00 p.m. London time, it had obtained requisite consents for its 9% notes due July 2024 in regards to its proposed consent solicitation (the December 2023 consent solicitation), as reported.
Requisite consents for its 9% notes due April 2024, 9% notes due June 2024, 9% notes due October 2024 and 9% notes due December 2024 were not received from the holders of each respective series and have lapsed and will not proceed, according to the company’s Dec. 20 announcement, as reported.
The company stated in the announcement that it has executed the amended and restated indenture with respect to the due July 2024 notes. Under the amended indenture, the company proposed to extend the notes by 37 months to Aug. 19, 2027 via amortization payments with 4% of principal to be paid on Jan. 31, 2024, to reduce the interest rate of the July 2024 notes to 4.5% per annum from 9%, and to include CSC Nanchang to the list of specified onshore assets, as reported.
The announcement states that each holder of the July 2024 notes which delivered a consent in the consent solicitation is deemed to have, amongst others, waived until July 19, 2024 the November interest non-payment under the due July 2024 notes, and acknowledged and agreed that the coupon will be paid on or before July 19, 2024, as reported.
However, the AHG position stated in the Kirkland letter is that the company amended terms of the December 2023 consent solicitation in a material way after its expiry (which was, after various extensions, 4:00 p.m. London time on Dec. 18, 2023), creating a new subordination proposal, according to the sources. The AHG position is that holders of the July 2024 notes could not have provided consent to the new subordination proposal - which temporally subordinates the July 2024 notes to all other tranches of bonds - because it was not presented to July 2024 noteholders before the expiration date of the consent solicitation proposal, the sources stated.
The Kirkland letter states that the company only purported that votes for a previous and materially different proposal - which didn’t impose a temporal subordination (more below) on the due July 2024 notes - should be deemed consent for the new subordination proposal after the expiration date of the consent solicitation, according to the sources.
The letter adds that holders of the July 2024 notes were not given a chance to properly consider the proposal and resubmit or revoke their consents before an extended deadline, despite the harm the proposal would cause, according to the sources. Without the opportunity to vote, the holders of the July 2024 notes have not - and could not have - consented to such terms, the sources added.
Temporal Subordination
Central to the AHG argument is that the consent solicitation statement and the company’s related announcements on Dec. 4 and Dec. 11 represent that the December 2023 consent solicitation was conditional on validly delivered (and not validly revoked) consents from holders of not less than 75% in aggregate outstanding principal amount of each of the April 2024 notes, the June 2024 notes, the July 2024 notes, the October 2024 notes and the December 2024 notes.
Also, the proposed amendments to each note series, along with proposed waivers, constitute a single proposal, and holders must consent to proposed amendments, as applicable, and proposed waivers as an entirety, the sources noted.
On this basis, the Kirkland letter sets out that any reasonable holder of the bonds would have concluded that the December 2023 consent solicitation was a packaged deal covering all five tranches of the bonds intended to take effect holistically. If the company failed to secure sufficient consents from the holders of any single tranche, the December 2023 consent solicitation would fail in its entirety, the letter states, according to the sources.
However, the new subordination proposal purports to waive the condition governing all five tranches of notes and amends the terms of the July 2024 notes on a standalone basis.
The amendments to the July 2024 notes defer the company’s principal redemption obligations related to the notes to a date after all of the other bonds have become due, the sources noted.
Under the proposal contemplated under the consent solicitation statement which holders of the July 2024 notes voted on, the holders would have their outstanding principal amounts paid out ahead of around $535 million of outstanding principal amounts of the bonds in other tranches under the proposed amortization schedule, the letter states, according to the sources.
However, under the new subordination proposal, which the Kirkland letter contends noteholders did not vote on, 100% of the outstanding principal amounts of the July 2024 notes would instead be paid long after the company is obligated to fully redeem all other tranches of the bonds by their respective 2024 maturity dates, in other words, the July 2024 notes would be temporally subordinated to $1.12 billion of outstanding principal payment obligations.
This erosion of rights of the holders of the July 2024 notes is termed “completely unjustifiable” in the Kirkland letter, the sources said.
The letter further refers to the “company’s blatant disregard for its creditors’ interests”, which raises questions of whether company directors have been properly advised on their fiduciary duties towards creditors while “in the zone of insolvency”, according to the sources.
Dec. 19 Waiver Disputed
As reported, China South City said in a notice dated Dec. 19 to its USD bondholders that the company had received requisite consents in respect of the 9% due July 2024 notes as of the further extended expiration date, and it has decided to waive the condition of inter-conditionality, according to a copy of the notice seen by Reorg.
The company stated in the notice that the consent solicitation is subject to, among other consent conditions, the receipt of the valid requisite consents to effect the proposed amendments with respect to each of the indentures. As stated in the original consent solicitation statement, the condition of inter-conditionality is for its sole benefit and may be waived by the company at its absolute discretion, the notice shows.
However, the Kirkland letter states that there is no clear legal or contractual basis for a waiver over the condition of a consent solicitation covering all five tranches of bonds, and that the AHG rejects and disputes the validity of the purported waiver and the company’s implementation of the new subordination proposal on the basis of the purported waiver.
The letter sets out that the consent solicitation memorandum states under its conditions that the consent conditions – other than with respect to the receipt of requisite consents – are for the company’s sole benefit and may be waived in whole or in part in the company’s absolute discretion.
The letter notes that requisite consents is clearly defined to include each tranche of the bonds, the sources stated.
On that basis, the AHG disputes there is any legal or contractual basis to the new subordination proposal, and the letter states that the company’s statements in its Dec. 20 announcement regarding consents obtained from holders of the July 2024 notes have no basis, since the consents were given for an entirely different transaction where all five bonds would be concurrently amended and termed out in the same manner, the sources said.
According to the sources, the letter states that the company must immediately notify the trustee of the July 2024 notes, and the market, that none of the purported amendments or waivers to the July 2024 notes are valid, until and unless all holders of the notes are given a reasonable opportunity to reconsider their positions and resubmit or revoke their consents to such amendments (including the new subordination proposal) before a new expiration date.
The AHG remains opposed to any further liability management exercises, or LMEs, in respect of the bonds on terms that “unfairly prejudice the rights and interests of the holders of the bonds for the benefit of the shareholders of the company”, the sources said, quoting the letter. If the company attempts any further LME on similar terms to the December 2023 consent solicitation without first consulting with the AHG, it should expect the AHG to vote against the LME, the sources stated.
The Kirkland letter states that the AHG fully reserves all of its rights, powers and remedies against the company in connection with the purported waiver and the new subordination proposal.
Kirkland declined to comment. Linklaters and China South City did not respond to requests for comment.
–Stephen Aldred
UPDATE 7: China South City Says It Obtains Requisite Consent for 9% Notes Due July 2024 Under Consent Solicitation, CS of Rest 4 Notes Lapse; Co. Has Paid Consent Fee to Due July 2024 Noteholders, to Pay Incentive Fee on Jan. 31
UPDATE 7: 4:03 a.m. ET 12/20/2023: China South City Holdings Ltd. announced to the Hong Kong stock exchange today, Dec. 20, that as of Dec. 18 at 4:00 p.m. London time, it had obtained the requisite consents for its 9% notes due July 2024 in regards to its proposed consent solicitation. However, the requisite consents for its 9% notes due April 2024, the 9% notes due June 2024, the 9% notes due October 2024 and the 9% notes due December 2024 have not been received from the holders of each respective series and have lapsed and will not proceed.
The company has executed the amended and restated indenture with respect to the due July 2024 notes. Under the amended indenture, the company proposed to extend the notes by 37 months to Aug. 19, 2027 via amortization payments with 4% of principal to be paid on Jan. 31, 2024, and to reduce the interest rate of the July 2024 notes to 4.5% per annum from 9%, and include CSC Nanchang to the list of specified onshore assets, according to the announcement.
Each holder of the July 2024 notes who delivered a consent in the consent solicitation is deemed to have, amongst others, waived until July 19, 2024 the November interest non-payment under the due July 2024 notes, and acknowledged and agreed that the coupon will be paid on or before July 19, 2024, the announcement shows.
The company has paid the consent fee on Dec. 19 to each holder of the July 2024 notes who has validly delivered (and not validly revoked) a consent on or prior to the further extended expiration date, and will pay the incentive fee on Jan. 31, 2024, according to the announcement.
China South City said in a notice dated Dec. 19 to its USD bondholders that the company had received requisite consents in respect of the 9% due July 2024 notes as of the further extended expiration date, and it has decided to waive the condition of inter-conditionality, according to a copy of the notice seen by Reorg.
The company stated in the notice that the consent solicitation is subject to, among other consent conditions, the receipt of the valid requisite consents to effect the proposed amendments with respect to each of the indentures. As stated in the original consent solicitation statement, the condition of inter-conditionality is for its sole benefit and may be waived by the company at its absolute discretion, the notice shows.
In the announcement today, the company said it remains committed to maintaining open communication with the holders and has been actively engaging with the holders to discuss debt management strategies, including but not limited to consent solicitation, schemes and exchange offers, as part of its ongoing efforts to manage its liquidity.
The company intends to ensure equitable treatment across all five series of notes. Should any further enhancements or more favorable terms be offered in the future to holders of the April 2024 notes, the June 2024 notes, the October 2024 notes and/or the December 2024 notes, the company will offer equivalent terms to the due July 2024 noteholders, the announcement shows.
As of the extended expiration date, holders of 69.87% of the aggregate outstanding principal amount across all five series of notes voted in favor of the consent solicitation, the announcement shows.
UPDATE 6: China South City Warns of Impending Default Over Bond Interest Payment; Extends Consent Solicitation Expiration Date to Dec. 18; Obtains Over 75% Support from USD Bondholders of at Least One Tranche and 69.8% Aggregate Support
UPDATE 6: 12:42 a.m. ET 12/18/2023: China South City Holdings Ltd. announced to the Hong Kong Stock Exchange today, Dec. 18 that it doesn't have the financial resources to pay the November interest on its 9% notes due July 2024 on or prior to Dec. 20, saying group has experienced, and is expected to continue to experience, significant liquidity and cash flow constraints due to the deteriorating operating environment affecting the real estate sector in mainland China.
The company said it has further extended the expiration date of its revised consent solicitation regarding five offshore notes to Dec. 18 at 4 p.m. London time, citing the circulation of an untrue statement made before the previous expiration date, which falls on Dec. 15 at 4 p.m. London time.
As of today, holders of 69.8% of the aggregate principal amount of the five notes have voted in favour of the revised consent solicitation, the company says.
The company clarifies in the announcement that it had obtained support from holders representing more than 75% of the outstanding principal amount of at least one tranche of the notes before Dec. 15, rebutting a media report published the same day which says an ad hoc group, or AHG, holding “a blocking stake of at least 25% in principal across all five tranches of the notes” is untrue and prejudicial, according to the announcement.
The group has other significant payment obligations including debt servicing obligations to a few onshore financial institutions totalling about CNY 500 million ($70.1 million) which also fall due in December 2023, according to the announcement.
The company urged investors to submit or resubmit their votes in favour of the revised consent solicitation as soon as possible, the announcement says. Holders who validly delivered a consent by the further extended expiration date on Dec. 19 will receive a maximum consent fee of 0.5% in principal amount and an incentive fee of 1% in principal amount of the notes.
China South City had improved terms of its proposed consent solicitation, originally launched on Dec. 4 to extend its five USD notes’ maturities for 33 to 39 months, adding an additional 4% principal payment on each series on Jan. 31, an additional 5% principal payment in 2025, an additional 1% cash incentive for each holder who consents by Dec. 15, and financing proceeds on CSC Nanchang as credit enhancement, as reported.
UPDATE 5: China South City AHG Reiterates Opposition to Revised CS Terms, Has Blocking Stake Across All Five Tranches of USD Notes
UPDATE 5: 6:16 a.m. ET 12/15/2023: An ad hoc group, or AHG, of China South City’s USD bondholders has reiterated that its opposition to the company’s revised terms of consent solicitation has not changed, and that it has a blocking stake of at least 25% in principal across all five tranches of the notes, according to two sources familiar with the matter.
The AHG, which previously stated its intention to vote against the original consent solicitation, sent a letter on Dec. 11 through its legal advisor Kirkland & Ellis to the company’s advisor, Linklaters, stating that it was “deeply concerned with the company’s unwillingness to withdraw the consent solicitation”, adding that the AHG has “carefully considered” and rejects the revised terms, and further, since it has blocking stakes across multiple tranches of the company’s notes and intends to vote against the revised terms, it will cause the consent solicitation to fail, as reported.
The AHG reiterates in the same letter its demands that China South City makes payment for the missed coupon due Nov. 20 on the company’s 9% due July 2024 notes before expiry of the 30-day grace period, and immediately withdraws the consent solicitation, as reported.
UPDATE 4: China South City Obtains Over 60% Support From USD Bondholders of Each Tranche for Revised Consent Solicitation, Might Consider Extending Expiration Date Tonight
UPDATE 4: 4:58 a.m. ET 12/15/2023: China South City has obtained support from USD holders representing over 60% of the principal amount from each of the five tranches in regards to the revised terms under the consent solicitation to extend its USD notes, while one of the tranches has received over 70% support, according to two sources familiar with the matter.
The company has received support from certain major bondholders, and will continue to remain in talks with other investors, said the sources.
As the expiration date of the consent solicitation ends today, Dec. 15, at 4 p.m. London time, China South City is considering whether to extend the deadline tonight to buy more time for investors to vote, according to one of the sources.
The company said in a press release on its website earlier today that the majority of its investors, including major bondholders, internationally renowned mega funds and family offices, had voted in favor of its revised terms of the consent solicitation with respect to its five offshore notes, as reported.
The company reminded investors to vote as early as possible to receive a maximum consent fee of 0.5% in principal amount and an incentive fee of 1% in principal amount of the notes, the same announcement says.
China South City had improved terms of its proposed consent solicitation, originally launched last week to extend its five USD notes’ maturities for 33 to 39 months, adding an additional 4% principal payment on each series on Jan. 31, an additional 5% principal payment in 2025, an additional 1% cash incentive for each holder who consents by Dec. 15, and financing proceeds on CSC Nanchang as credit enhancement, as reported
China South City could not be reached for immediate comment.
UPDATE 3: China South City Says Majority of Investors Voted In Favor of Revised Consent Solicitation Terms
UPDATE 3: 3:52 a.m. ET 12/15/2023: China South City Holdings Ltd. said in a release from its official website today, Dec. 15, that the majority of its investors, including major bondholders, internationally renowned mega funds and family offices, had voted in favor of its revised terms of the consent solicitation with respect to five of its offshore notes.
China South City revised the implementation of a mandatory redemption obligation, under which on Jan. 31, 2024, the company shall redeem 4% of the aggregate principal amount of each series of the notes outstanding on the payment date, which is expected to be Dec. 19. Further, it also revised the amortization schedule to include an additional amortization payment of 5% of the aggregate principal amount of each series of the notes in 2025 and included CSC Nanchang as a specified onshore asset for credit enhancement measures, as reported.
The company reminded investors to vote as early as possible to receive a maximum consent fee of 0.5% in principal amount and an incentive fee of 1% in principal amount of the notes, the announcement says.
UPDATE 2: China South City Revises Consent Solicitation on 5 Offshore Notes to Add 4% Redemption on Jan. 31, 2024, 5% Additional Amortization in 2025, Include CSC Nanchang as Specified Onshore Asset; Expiration Date Extended to Dec. 15
UPDATE 2: 8:22 p.m. ET 12/10/2023: China South City Holdings Ltd. announced to the Hong Kong stock exchange today, Dec. 11, that it determined to improve the terms of the consent solicitation regarding five of its offshore notes, including the implementation of a mandatory redemption obligation, under which on Jan. 31, 2024, the company shall redeem 4% of the aggregate principal amount of each series of the notes outstanding on the payment date, which is expected to be Dec. 19.
The company also revised the amortization schedule to include an additional amortization payment of 5% of the aggregate principal amount of each series of the notes in 2025 and included CSC Nanchang as a specified onshore asset.
Following the modification, the early expiration date, the early consent fee and the late consent fee are no longer applicable to the consent solicitation, and the expiration date is extended to Dec. 15 at 4 p.m. London time, the announcement states.
For each holder who has validly delivered a consent on or prior to Dec. 15, the company, subject to the terms and conditions of the consent solicitation, will make a cash payment of $5 for each $1,000 in principal amount of the notes on Dec. 19, and $10 for each $1,000 in principal amount of the notes on the incentive fee payment date, which is expected to be Jan. 31, 2024, according to the announcement.
UPDATE 1: China Real Estate Developers Liability Management, Restructuring Exercise Comparison
UPDATE 1: 8:20 p.m. ET 12/4/2023: Reorg's comparison of the key terms of recent liability management and restructuring exercises launched by Chinese real estate developers is now updated with the proposed liability management exercise by China South City and Modern Land (China) Co., Limited.
Original Story 3:14 a.m. UTC on Dec. 4, 2023
China South City Launches Consent Solicitation for 5 Offshore Notes, Proposing ~3Y Maturity Extension, Lowering Coupon to 4.5%; Postpones Due Nov. 20 Interest Payment to July 19, 2024
Relevant Document:
Announcement
China South City announced to the Hong Kong Exchange today, Dec. 4, that it is launching a consent solicitation for its five offshore bonds, proposing to extend the notes’ maturities for 33 to 39 months and lower the interest rates of the notes to 4.5%, according to an announcement and a consent presentation seen by Reorg.
The company is seeking consent from creditors to postpone July 19, 2024 an interest payment originally due Nov. 20 on the $235 million 9% due July 2024 notes and waive default arising from the non-payment, according to the announcement. Interest accrued on the other notes up until Dec. 19 will be PIKed at 9%, according to the consent presentation.
For principal payments of its outstanding $289 million 9% notes due April 12, 2024, the company proposes to repay the principal in installments with 3% principal payment on March 19, 2026, 3% on Aug. 19, 2026, and the remaining 94% on Jan. 19, 2027, according to the consent presentation.
For the outstanding $287 million 9% notes due June 26, 2024, the company proposes to pay back 3% principal on Jan. 19, 2026, 3% on July 29, 2026, 4% on March 19, 2027, and the remaining principal on May 19, 2027.
For the outstanding $235 million 9% notes due July 20, 2024, it proposes to repay 3% principal on Dec. 19, 2025, 3% on June 29, 2026, 4% on Feb. 19, 2027, and the remaining principal on Aug. 19, 2027.
For its outstanding $203 million 9% notes due Oct. 9, 2024, the company plans to repay 5% principal on Sept. 19, 2025, 3% on May 19, 2026, 3% on Oct. 19, 2026, 4% on May 19, 2027, followed by the remaining 85% on Dec. 19, 2027.
For the outstanding $333 million 9% senior notes due Dec. 11, 2024, the company proposes to repay 5% principal on July 19, 2025, 3% on April 19, 2026, 3% on Sept. 19, 2026, 4% on April 19, 2027, and a final payment of 85% principal on March 19, 2028.
China South City will also slash the interest rates on all notes to 4.5% starting from the consent solicitation payment date, which is expected to be Dec. 19.
A keepwell deed provided by Shenzhen SEZ Construction and Development Group Co., China South City’s largest shareholder, as trustee of the notes will remain in place if the consent solicitation and the proposed amendment become effective.
The company will make a $5 cash payment for each $1,000 principal to the eligible holder who has validly delivered consent on or prior to the early expiration date of Dec. 11 at 4 p.m. London Time, and $1.5 for each $1,000 principal for holders who validly delivered consent after the early expiration date but on or prior to the expiration date of Dec. 13 at 5 p.m. London Time.
China South City has engaged Haitong International Securities and China CITIC Bank International as the solicitation agents, the announcement shows.
The company needs consent from holders holding at least 75% of each of the five offshore notes in order to pass the consent solicitation, according to the consent presentation.
Below is China South City's capital structure:
Under the December 2023 consent solicitation, holders of the due July notes agreed to the company’s proposal to extend the notes’ maturity by 37 months to Aug. 19, 2027 via amortization payments with 4% of principal to be paid on Jan. 31, 2024, as reported.
China South City launched a consent solicitation on Dec. 4, 2023 proposing to extend the maturities of its five offshore USD notes for 33 to 39 months but only managed to obtain the requisite consents for its 9% notes due July 2024 which have now been extended to 2027, according to the company’s Dec. 20 announcement.
Consenting holders of the originally due July notes also agreed to waive the default after the company failed to make a due November interest payment and agreed for the coupon to be paid by July 19. The consent solicitation failed on the remaining four tranches, as reported.
The company had earlier remitted funds to cure a missed $12.9 million coupon, originally due Dec. 26, 2023, under its $287.2 million 9% notes due June 26, 2024, as reported.
UPDATE 10: China South City Remits Funds to Pay Missed Coupon on $287M Notes Due June 26; Notes Up 15 Pts in January to 44
UPDATE 10: 3:01 a.m. ET 1/26/2024: China South City has remitted funds to cure a missed coupon under its outstanding $287.2 million 9% notes due June 26, 2024, according to two sources familiar with the matter.
One holder of the due June notes told Reorg that the coupon payment was received as of Thursday night, Jan. 25.
As reported, the $12.9 million interest payment was originally due Dec. 26, 2023. Under the terms of the indenture, China South City has a 30-day grace period until Jan. 25 to make the interest payment.
The due June notes were indicated around 44 today, up about 15 points from the high 20s in early January, according to two buysiders.
In December, China South City launched a consent solicitation to extend its five offshore USD notes including the 9% due June notes. However, the company only managed to obtain requisite consents to extend and amend the terms of the 9% due July notes; terms of the remaining four series, including the due June notes, were not amended. As a result of the consent solicitation, an interest payment on the due July notes originally due November 2023 was postponed to be paid before July, 19, 2024, as reported.
China South City said in the Dec. 20 announcement that it is communicating with holders to discuss debt management strategies and that should any further enhancements or more favorable terms be offered in the future to holders of the remaining four tranches, the company will offer equivalent terms to the due July 2024 noteholders.
China South City did not respond to requests for comment.
UPDATE 9: China South City Plans to Cure Missed Coupon on $287M Notes Due June 26; Notes Up 10 Pts in January to 42/44
UPDATE 9: 5:09 a.m. ET 1/19/2024: China South City told certain investors that it plans to pay a missed coupon on its outstanding $287.2 million 9% notes due June 26, 2024 within a 30-day grace period, according to two sources familiar with the matter.
The coupon payment - totalling about $12.9 million - was originally due Dec. 26, 2023 and has a 30-day grace period that will end next week, said the sources.
China South City’s USD notes have been rising throughout January, with its due June notes up over 10 points to be indicated around 42/44 today, Jan. 19 from the high 20s level in early January, according to two buysiders.
China South City launched a consent solicitation on Dec. 4, 2023 proposing to extend the maturities of its five offshore USD notes for 33 to 39 months but only managed to obtain the requisite consents for its 9% notes due July 2024 which have now been extended to 2027, according to the company’s Dec. 20 announcement.
Under the consent solicitation, consenting holders of the originally due July notes also agreed to waive the default after the company failed to make a due November interest payment and agreed for the coupon to be paid by July 19. The consent solicitation failed on the remaining four tranches, as reported.
China South City said in a notice dated Dec. 19 to its USD bondholders that the company had received requisite consents in respect of the 9% due July 2024 notes as of the further extended expiration date, and it has decided to waive the condition of inter-conditionality, as reported.
In the Dec. 20 announcement, the company said it has been engaging with holders to discuss debt management strategies, including but not limited to consent solicitation, schemes and exchange offers, as part of its ongoing efforts to manage its liquidity, adding that it will offer equivalent terms to the due July 2024 noteholders if there is any further enhancements to be offered to the rest four notes.
An ad hoc group, or AHG, of holders of its offshore USD notes has disputed the company’s representations in its Dec. 20 announcement, in a letter sent to the company’s counsel Linklaters from the AHG counsel Kirkland & Ellis. The letter disputes that the company has secured requisite consents from holders of the 9% notes due July 2024 to implement amendments to the notes indenture, as reported.
China South City declined to comment.
UPDATE 8: China South City AHG’s Legal Counsel Sends Letter to Co. Disputing Requisite Consents Secured to Amend 9% Senior Notes Due July 2024; States Co. Breached Terms of Consent Solicitation, Disputes Right to Waive Condition of Inter-Conditionality
Editor’s Note: The following story was originally published on Dec. 26. It has been reissued to reach a wider audience.
UPDATE 8: 2:21 a.m. ET 12/26/2023: Kirkland & Ellis, as legal counsel to an ad hoc group, or AHG, or holders of China South City Holdings Ltd.’s offshore USD notes sent a letter on or around Dec. 22 to Linklaters, legal counsel to the company, stating that the AHG disputes the company’s representations in its Dec. 20 announcement that it has secured requisite consents from holders of its 9% senior notes due July 2024 to implement amendments to the notes indenture, according to two sources with knowledge of the matter.
According to the letter, the company has not obtained valid consents from requisite holders of the July 2024 notes to satisfy the requirements related to amendments with the consent of holders contained in the July 2024 notes indenture, to effect any amendments to the July 2024 notes, or any waiver of the coupon payments due and payable under the bonds, the sources said. The reasoning behind the statement are set out in the letter sent to Linklaters (more below), according to the sources.
The AHG includes beneficial holders of, among other tranches, the 9% senior notes due July 2024, the sources noted. China South City had announced on Dec. 20, that as of Dec. 18 at 4:00 p.m. London time, it had obtained requisite consents for its 9% notes due July 2024 in regards to its proposed consent solicitation (the December 2023 consent solicitation), as reported.
Requisite consents for its 9% notes due April 2024, 9% notes due June 2024, 9% notes due October 2024 and 9% notes due December 2024 were not received from the holders of each respective series and have lapsed and will not proceed, according to the company’s Dec. 20 announcement, as reported.
The company stated in the announcement that it has executed the amended and restated indenture with respect to the due July 2024 notes. Under the amended indenture, the company proposed to extend the notes by 37 months to Aug. 19, 2027 via amortization payments with 4% of principal to be paid on Jan. 31, 2024, to reduce the interest rate of the July 2024 notes to 4.5% per annum from 9%, and to include CSC Nanchang to the list of specified onshore assets, as reported.
The announcement states that each holder of the July 2024 notes which delivered a consent in the consent solicitation is deemed to have, amongst others, waived until July 19, 2024 the November interest non-payment under the due July 2024 notes, and acknowledged and agreed that the coupon will be paid on or before July 19, 2024, as reported.
However, the AHG position stated in the Kirkland letter is that the company amended terms of the December 2023 consent solicitation in a material way after its expiry (which was, after various extensions, 4:00 p.m. London time on Dec. 18, 2023), creating a new subordination proposal, according to the sources. The AHG position is that holders of the July 2024 notes could not have provided consent to the new subordination proposal - which temporally subordinates the July 2024 notes to all other tranches of bonds - because it was not presented to July 2024 noteholders before the expiration date of the consent solicitation proposal, the sources stated.
The Kirkland letter states that the company only purported that votes for a previous and materially different proposal - which didn’t impose a temporal subordination (more below) on the due July 2024 notes - should be deemed consent for the new subordination proposal after the expiration date of the consent solicitation, according to the sources.
The letter adds that holders of the July 2024 notes were not given a chance to properly consider the proposal and resubmit or revoke their consents before an extended deadline, despite the harm the proposal would cause, according to the sources. Without the opportunity to vote, the holders of the July 2024 notes have not - and could not have - consented to such terms, the sources added.
Temporal Subordination
Central to the AHG argument is that the consent solicitation statement and the company’s related announcements on Dec. 4 and Dec. 11 represent that the December 2023 consent solicitation was conditional on validly delivered (and not validly revoked) consents from holders of not less than 75% in aggregate outstanding principal amount of each of the April 2024 notes, the June 2024 notes, the July 2024 notes, the October 2024 notes and the December 2024 notes.
Also, the proposed amendments to each note series, along with proposed waivers, constitute a single proposal, and holders must consent to proposed amendments, as applicable, and proposed waivers as an entirety, the sources noted.
On this basis, the Kirkland letter sets out that any reasonable holder of the bonds would have concluded that the December 2023 consent solicitation was a packaged deal covering all five tranches of the bonds intended to take effect holistically. If the company failed to secure sufficient consents from the holders of any single tranche, the December 2023 consent solicitation would fail in its entirety, the letter states, according to the sources.
However, the new subordination proposal purports to waive the condition governing all five tranches of notes and amends the terms of the July 2024 notes on a standalone basis.
The amendments to the July 2024 notes defer the company’s principal redemption obligations related to the notes to a date after all of the other bonds have become due, the sources noted.
Under the proposal contemplated under the consent solicitation statement which holders of the July 2024 notes voted on, the holders would have their outstanding principal amounts paid out ahead of around $535 million of outstanding principal amounts of the bonds in other tranches under the proposed amortization schedule, the letter states, according to the sources.
However, under the new subordination proposal, which the Kirkland letter contends noteholders did not vote on, 100% of the outstanding principal amounts of the July 2024 notes would instead be paid long after the company is obligated to fully redeem all other tranches of the bonds by their respective 2024 maturity dates, in other words, the July 2024 notes would be temporally subordinated to $1.12 billion of outstanding principal payment obligations.
This erosion of rights of the holders of the July 2024 notes is termed “completely unjustifiable” in the Kirkland letter, the sources said.
The letter further refers to the “company’s blatant disregard for its creditors’ interests”, which raises questions of whether company directors have been properly advised on their fiduciary duties towards creditors while “in the zone of insolvency”, according to the sources.
Dec. 19 Waiver Disputed
As reported, China South City said in a notice dated Dec. 19 to its USD bondholders that the company had received requisite consents in respect of the 9% due July 2024 notes as of the further extended expiration date, and it has decided to waive the condition of inter-conditionality, according to a copy of the notice seen by Reorg.
The company stated in the notice that the consent solicitation is subject to, among other consent conditions, the receipt of the valid requisite consents to effect the proposed amendments with respect to each of the indentures. As stated in the original consent solicitation statement, the condition of inter-conditionality is for its sole benefit and may be waived by the company at its absolute discretion, the notice shows.
However, the Kirkland letter states that there is no clear legal or contractual basis for a waiver over the condition of a consent solicitation covering all five tranches of bonds, and that the AHG rejects and disputes the validity of the purported waiver and the company’s implementation of the new subordination proposal on the basis of the purported waiver.
The letter sets out that the consent solicitation memorandum states under its conditions that the consent conditions – other than with respect to the receipt of requisite consents – are for the company’s sole benefit and may be waived in whole or in part in the company’s absolute discretion.
The letter notes that requisite consents is clearly defined to include each tranche of the bonds, the sources stated.
On that basis, the AHG disputes there is any legal or contractual basis to the new subordination proposal, and the letter states that the company’s statements in its Dec. 20 announcement regarding consents obtained from holders of the July 2024 notes have no basis, since the consents were given for an entirely different transaction where all five bonds would be concurrently amended and termed out in the same manner, the sources said.
According to the sources, the letter states that the company must immediately notify the trustee of the July 2024 notes, and the market, that none of the purported amendments or waivers to the July 2024 notes are valid, until and unless all holders of the notes are given a reasonable opportunity to reconsider their positions and resubmit or revoke their consents to such amendments (including the new subordination proposal) before a new expiration date.
The AHG remains opposed to any further liability management exercises, or LMEs, in respect of the bonds on terms that “unfairly prejudice the rights and interests of the holders of the bonds for the benefit of the shareholders of the company”, the sources said, quoting the letter. If the company attempts any further LME on similar terms to the December 2023 consent solicitation without first consulting with the AHG, it should expect the AHG to vote against the LME, the sources stated.
The Kirkland letter states that the AHG fully reserves all of its rights, powers and remedies against the company in connection with the purported waiver and the new subordination proposal.
Kirkland declined to comment. Linklaters and China South City did not respond to requests for comment.
–Stephen Aldred
UPDATE 7: China South City Says It Obtains Requisite Consent for 9% Notes Due July 2024 Under Consent Solicitation, CS of Rest 4 Notes Lapse; Co. Has Paid Consent Fee to Due July 2024 Noteholders, to Pay Incentive Fee on Jan. 31
UPDATE 7: 4:03 a.m. ET 12/20/2023: China South City Holdings Ltd. announced to the Hong Kong stock exchange today, Dec. 20, that as of Dec. 18 at 4:00 p.m. London time, it had obtained the requisite consents for its 9% notes due July 2024 in regards to its proposed consent solicitation. However, the requisite consents for its 9% notes due April 2024, the 9% notes due June 2024, the 9% notes due October 2024 and the 9% notes due December 2024 have not been received from the holders of each respective series and have lapsed and will not proceed.
The company has executed the amended and restated indenture with respect to the due July 2024 notes. Under the amended indenture, the company proposed to extend the notes by 37 months to Aug. 19, 2027 via amortization payments with 4% of principal to be paid on Jan. 31, 2024, and to reduce the interest rate of the July 2024 notes to 4.5% per annum from 9%, and include CSC Nanchang to the list of specified onshore assets, according to the announcement.
Each holder of the July 2024 notes who delivered a consent in the consent solicitation is deemed to have, amongst others, waived until July 19, 2024 the November interest non-payment under the due July 2024 notes, and acknowledged and agreed that the coupon will be paid on or before July 19, 2024, the announcement shows.
The company has paid the consent fee on Dec. 19 to each holder of the July 2024 notes who has validly delivered (and not validly revoked) a consent on or prior to the further extended expiration date, and will pay the incentive fee on Jan. 31, 2024, according to the announcement.
China South City said in a notice dated Dec. 19 to its USD bondholders that the company had received requisite consents in respect of the 9% due July 2024 notes as of the further extended expiration date, and it has decided to waive the condition of inter-conditionality, according to a copy of the notice seen by Reorg.
The company stated in the notice that the consent solicitation is subject to, among other consent conditions, the receipt of the valid requisite consents to effect the proposed amendments with respect to each of the indentures. As stated in the original consent solicitation statement, the condition of inter-conditionality is for its sole benefit and may be waived by the company at its absolute discretion, the notice shows.
In the announcement today, the company said it remains committed to maintaining open communication with the holders and has been actively engaging with the holders to discuss debt management strategies, including but not limited to consent solicitation, schemes and exchange offers, as part of its ongoing efforts to manage its liquidity.
The company intends to ensure equitable treatment across all five series of notes. Should any further enhancements or more favorable terms be offered in the future to holders of the April 2024 notes, the June 2024 notes, the October 2024 notes and/or the December 2024 notes, the company will offer equivalent terms to the due July 2024 noteholders, the announcement shows.
As of the extended expiration date, holders of 69.87% of the aggregate outstanding principal amount across all five series of notes voted in favor of the consent solicitation, the announcement shows.
UPDATE 6: China South City Warns of Impending Default Over Bond Interest Payment; Extends Consent Solicitation Expiration Date to Dec. 18; Obtains Over 75% Support from USD Bondholders of at Least One Tranche and 69.8% Aggregate Support
UPDATE 6: 12:42 a.m. ET 12/18/2023: China South City Holdings Ltd. announced to the Hong Kong Stock Exchange today, Dec. 18 that it doesn't have the financial resources to pay the November interest on its 9% notes due July 2024 on or prior to Dec. 20, saying group has experienced, and is expected to continue to experience, significant liquidity and cash flow constraints due to the deteriorating operating environment affecting the real estate sector in mainland China.
The company said it has further extended the expiration date of its revised consent solicitation regarding five offshore notes to Dec. 18 at 4 p.m. London time, citing the circulation of an untrue statement made before the previous expiration date, which falls on Dec. 15 at 4 p.m. London time.
As of today, holders of 69.8% of the aggregate principal amount of the five notes have voted in favour of the revised consent solicitation, the company says.
The company clarifies in the announcement that it had obtained support from holders representing more than 75% of the outstanding principal amount of at least one tranche of the notes before Dec. 15, rebutting a media report published the same day which says an ad hoc group, or AHG, holding “a blocking stake of at least 25% in principal across all five tranches of the notes” is untrue and prejudicial, according to the announcement.
The group has other significant payment obligations including debt servicing obligations to a few onshore financial institutions totalling about CNY 500 million ($70.1 million) which also fall due in December 2023, according to the announcement.
The company urged investors to submit or resubmit their votes in favour of the revised consent solicitation as soon as possible, the announcement says. Holders who validly delivered a consent by the further extended expiration date on Dec. 19 will receive a maximum consent fee of 0.5% in principal amount and an incentive fee of 1% in principal amount of the notes.
China South City had improved terms of its proposed consent solicitation, originally launched on Dec. 4 to extend its five USD notes’ maturities for 33 to 39 months, adding an additional 4% principal payment on each series on Jan. 31, an additional 5% principal payment in 2025, an additional 1% cash incentive for each holder who consents by Dec. 15, and financing proceeds on CSC Nanchang as credit enhancement, as reported.
UPDATE 5: China South City AHG Reiterates Opposition to Revised CS Terms, Has Blocking Stake Across All Five Tranches of USD Notes
UPDATE 5: 6:16 a.m. ET 12/15/2023: An ad hoc group, or AHG, of China South City’s USD bondholders has reiterated that its opposition to the company’s revised terms of consent solicitation has not changed, and that it has a blocking stake of at least 25% in principal across all five tranches of the notes, according to two sources familiar with the matter.
The AHG, which previously stated its intention to vote against the original consent solicitation, sent a letter on Dec. 11 through its legal advisor Kirkland & Ellis to the company’s advisor, Linklaters, stating that it was “deeply concerned with the company’s unwillingness to withdraw the consent solicitation”, adding that the AHG has “carefully considered” and rejects the revised terms, and further, since it has blocking stakes across multiple tranches of the company’s notes and intends to vote against the revised terms, it will cause the consent solicitation to fail, as reported.
The AHG reiterates in the same letter its demands that China South City makes payment for the missed coupon due Nov. 20 on the company’s 9% due July 2024 notes before expiry of the 30-day grace period, and immediately withdraws the consent solicitation, as reported.
UPDATE 4: China South City Obtains Over 60% Support From USD Bondholders of Each Tranche for Revised Consent Solicitation, Might Consider Extending Expiration Date Tonight
UPDATE 4: 4:58 a.m. ET 12/15/2023: China South City has obtained support from USD holders representing over 60% of the principal amount from each of the five tranches in regards to the revised terms under the consent solicitation to extend its USD notes, while one of the tranches has received over 70% support, according to two sources familiar with the matter.
The company has received support from certain major bondholders, and will continue to remain in talks with other investors, said the sources.
As the expiration date of the consent solicitation ends today, Dec. 15, at 4 p.m. London time, China South City is considering whether to extend the deadline tonight to buy more time for investors to vote, according to one of the sources.
The company said in a press release on its website earlier today that the majority of its investors, including major bondholders, internationally renowned mega funds and family offices, had voted in favor of its revised terms of the consent solicitation with respect to its five offshore notes, as reported.
The company reminded investors to vote as early as possible to receive a maximum consent fee of 0.5% in principal amount and an incentive fee of 1% in principal amount of the notes, the same announcement says.
China South City had improved terms of its proposed consent solicitation, originally launched last week to extend its five USD notes’ maturities for 33 to 39 months, adding an additional 4% principal payment on each series on Jan. 31, an additional 5% principal payment in 2025, an additional 1% cash incentive for each holder who consents by Dec. 15, and financing proceeds on CSC Nanchang as credit enhancement, as reported
China South City could not be reached for immediate comment.
UPDATE 3: China South City Says Majority of Investors Voted In Favor of Revised Consent Solicitation Terms
UPDATE 3: 3:52 a.m. ET 12/15/2023: China South City Holdings Ltd. said in a release from its official website today, Dec. 15, that the majority of its investors, including major bondholders, internationally renowned mega funds and family offices, had voted in favor of its revised terms of the consent solicitation with respect to five of its offshore notes.
China South City revised the implementation of a mandatory redemption obligation, under which on Jan. 31, 2024, the company shall redeem 4% of the aggregate principal amount of each series of the notes outstanding on the payment date, which is expected to be Dec. 19. Further, it also revised the amortization schedule to include an additional amortization payment of 5% of the aggregate principal amount of each series of the notes in 2025 and included CSC Nanchang as a specified onshore asset for credit enhancement measures, as reported.
The company reminded investors to vote as early as possible to receive a maximum consent fee of 0.5% in principal amount and an incentive fee of 1% in principal amount of the notes, the announcement says.
UPDATE 2: China South City Revises Consent Solicitation on 5 Offshore Notes to Add 4% Redemption on Jan. 31, 2024, 5% Additional Amortization in 2025, Include CSC Nanchang as Specified Onshore Asset; Expiration Date Extended to Dec. 15
UPDATE 2: 8:22 p.m. ET 12/10/2023: China South City Holdings Ltd. announced to the Hong Kong stock exchange today, Dec. 11, that it determined to improve the terms of the consent solicitation regarding five of its offshore notes, including the implementation of a mandatory redemption obligation, under which on Jan. 31, 2024, the company shall redeem 4% of the aggregate principal amount of each series of the notes outstanding on the payment date, which is expected to be Dec. 19.
The company also revised the amortization schedule to include an additional amortization payment of 5% of the aggregate principal amount of each series of the notes in 2025 and included CSC Nanchang as a specified onshore asset.
Following the modification, the early expiration date, the early consent fee and the late consent fee are no longer applicable to the consent solicitation, and the expiration date is extended to Dec. 15 at 4 p.m. London time, the announcement states.
For each holder who has validly delivered a consent on or prior to Dec. 15, the company, subject to the terms and conditions of the consent solicitation, will make a cash payment of $5 for each $1,000 in principal amount of the notes on Dec. 19, and $10 for each $1,000 in principal amount of the notes on the incentive fee payment date, which is expected to be Jan. 31, 2024, according to the announcement.
UPDATE 1: China Real Estate Developers Liability Management, Restructuring Exercise Comparison
UPDATE 1: 8:20 p.m. ET 12/4/2023: Reorg's comparison of the key terms of recent liability management and restructuring exercises launched by Chinese real estate developers is now updated with the proposed liability management exercise by China South City and Modern Land (China) Co., Limited.
Original Story 3:14 a.m. UTC on Dec. 4, 2023
China South City Launches Consent Solicitation for 5 Offshore Notes, Proposing ~3Y Maturity Extension, Lowering Coupon to 4.5%; Postpones Due Nov. 20 Interest Payment to July 19, 2024
Relevant Document:
Announcement
China South City announced to the Hong Kong Exchange today, Dec. 4, that it is launching a consent solicitation for its five offshore bonds, proposing to extend the notes’ maturities for 33 to 39 months and lower the interest rates of the notes to 4.5%, according to an announcement and a consent presentation seen by Reorg.
The company is seeking consent from creditors to postpone July 19, 2024 an interest payment originally due Nov. 20 on the $235 million 9% due July 2024 notes and waive default arising from the non-payment, according to the announcement. Interest accrued on the other notes up until Dec. 19 will be PIKed at 9%, according to the consent presentation.
For principal payments of its outstanding $289 million 9% notes due April 12, 2024, the company proposes to repay the principal in installments with 3% principal payment on March 19, 2026, 3% on Aug. 19, 2026, and the remaining 94% on Jan. 19, 2027, according to the consent presentation.
For the outstanding $287 million 9% notes due June 26, 2024, the company proposes to pay back 3% principal on Jan. 19, 2026, 3% on July 29, 2026, 4% on March 19, 2027, and the remaining principal on May 19, 2027.
For the outstanding $235 million 9% notes due July 20, 2024, it proposes to repay 3% principal on Dec. 19, 2025, 3% on June 29, 2026, 4% on Feb. 19, 2027, and the remaining principal on Aug. 19, 2027.
For its outstanding $203 million 9% notes due Oct. 9, 2024, the company plans to repay 5% principal on Sept. 19, 2025, 3% on May 19, 2026, 3% on Oct. 19, 2026, 4% on May 19, 2027, followed by the remaining 85% on Dec. 19, 2027.
For the outstanding $333 million 9% senior notes due Dec. 11, 2024, the company proposes to repay 5% principal on July 19, 2025, 3% on April 19, 2026, 3% on Sept. 19, 2026, 4% on April 19, 2027, and a final payment of 85% principal on March 19, 2028.
China South City will also slash the interest rates on all notes to 4.5% starting from the consent solicitation payment date, which is expected to be Dec. 19.
A keepwell deed provided by Shenzhen SEZ Construction and Development Group Co., China South City’s largest shareholder, as trustee of the notes will remain in place if the consent solicitation and the proposed amendment become effective.
The company will make a $5 cash payment for each $1,000 principal to the eligible holder who has validly delivered consent on or prior to the early expiration date of Dec. 11 at 4 p.m. London Time, and $1.5 for each $1,000 principal for holders who validly delivered consent after the early expiration date but on or prior to the expiration date of Dec. 13 at 5 p.m. London Time.
China South City has engaged Haitong International Securities and China CITIC Bank International as the solicitation agents, the announcement shows.
The company needs consent from holders holding at least 75% of each of the five offshore notes in order to pass the consent solicitation, according to the consent presentation.
Below is China South City's capital structure:
|
09/30/2023 |
EBITDA Multiple |
|||||||||
|---|---|---|---|---|---|---|---|---|---|---|
|
(HKD in Millions) |
Amount |
Price |
Mkt. Val. |
US$ Amt. |
US$ Mkt. Val. |
Maturity |
Rate |
Yield |
Book |
Market |
|
|
||||||||||
|
Secured Bank Loans |
20,750.7 |
|
20,750.7 |
2,643.4 |
2,643.4 |
|
|
|
||
|
Unsecured Bank Loans |
105.0 |
|
105.0 |
13.4 |
13.4 |
|
|
|
||
|
Total Bank Borrowings |
20,855.7 |
20,855.7 |
2,656.8 |
2,656.8 |
16.7x |
16.7x |
||||
|
$288.8M 9% senior notes due 2024 1 |
2,267.4 |
|
2,267.4 |
288.8 |
288.8 |
Apr-12-2024 |
9.000% |
|
||
|
$287.2M 9% senior notes due 2024 1 |
2,254.4 |
|
2,254.4 |
287.2 |
287.2 |
Jun-26-2024 |
9.000% |
|
||
|
$235M 9% senior notes due 2024 1 |
1,844.9 |
|
1,844.9 |
235.0 |
235.0 |
Jul-20-2024 |
9.000% |
|
||
|
$202.5M 9% senior notes due 2024 1 |
1,589.6 |
|
1,589.6 |
202.5 |
202.5 |
Oct-09-2024 |
9.000% |
|
||
|
$333M 9% senior notes due 2024 1 |
2,614.1 |
|
2,614.1 |
333.0 |
333.0 |
Dec-11-2024 |
9.000% |
|
||
|
Total Offshore Notes |
10,570.4 |
10,570.4 |
1,346.5 |
1,346.5 |
25.2x |
25.2x |
||||
|
Total Debt |
31,426.1 |
31,426.1 |
4,003.3 |
4,003.3 |
25.2x |
25.2x |
||||
|
Less: Cash and Equivalents |
(916.7) |
(916.7) |
(116.8) |
(116.8) |
||||||
|
Plus: Restricted Cash |
1,026.4 |
1,026.4 |
130.8 |
130.8 |
||||||
|
Net Debt |
31,535.8 |
31,535.8 |
4,017.3 |
4,017.3 |
25.3x |
25.3x |
||||
|
Plus: Market Capitalization |
4,122.5 |
4,122.5 |
525.2 |
525.2 |
||||||
|
Enterprise Value |
35,658.3 |
35,658.3 |
4,542.5 |
4,542.5 |
28.6x |
28.6x |
||||
|
Operating Metrics |
US$ Amt. |
|||||||||
|
LTM Reorg EBITDA |
1,248.9 |
159.1 |
||||||||
|
|
||||||||||
|
Liquidity |
||||||||||
|
Plus: Cash and Equivalents |
916.7 |
116.8 |
||||||||
|
Less: Restricted Cash |
(1,026.4) |
(130.8) |
||||||||
|
Total Liquidity |
(109.7) |
(14.0) |
||||||||
|
Credit Metrics |
||||||||||
|
Gross Leverage |
25.2x |
|||||||||
|
Net Leverage |
25.3x |
|||||||||
|
Notes: Source: Refinitiv, company filings; pro-forma Nov'23 unrestricted cash balance is negative after adjusting for scheduled principal repayments on USD notes made in Q4'23 1. Terms amended pursuant to consent solicitation completed Aug'22 Pro Forma: Includes scheduled principal repayments on new notes between Sep'23 to Nov'23 US$ Translation: HKD/USD rate used for USD conversion is 7.85. |
||||||||||
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