China South City extends consent bid, rejects ad hoc group claims

Chicago, Dec. 18 – China South City Holdings Ltd. further extended the time for its consent solicitation relating to five series of notes to 11 a.m. ET on Dec. 18, an over-the-weekend extension, according to an announcement.

The company notes that there was a media report on Friday that an ad hoc group of holders had a “blocking stake of at least 25% in principal across all five tranches.” The company says the statement is “untrue and highly prejudicial.”

The information and tabulation agent notified the company on Friday afternoon that at least one tranche had already garnered favorable votes from holders representing 75% of those notes.

As of Monday, holders of 69.8% of the aggregate amount outstanding overall of the notes voted in favor of the consent solicitation.

The company extended the consent solicitation to encourage holders who may have been prejudiced to not participate due to the media report on Friday, thinking that their votes would be futile.

Recap

As announced on Dec. 4, China South City is seeking consents from holders of its 9% senior notes due April 2024 (ISIN: XS2085883119), 9% senior notes due June 2024 (ISIN: XS2120092882), 9% senior notes due July 2024 (ISIN: XS1720216388), 9% senior notes due October 2024 (ISIN: XS2238030162) and 9% senior notes due December 2024 (ISIN: XS2227909640).

Following noteholders’ feedback, the company decided to “improve” the terms of the offer on Dec. 11.

The changes are as follows:

• Implementation of a mandatory redemption on Jan. 31 of 4% of the aggregate principal amount of each notes series that is outstanding on the payment date;

• Revision of the amortization schedule to include an additional amortization payment on the relevant payment date equaling 5% of the aggregate principal amount of each series of the notes outstanding on the payment date; and

• Inclusion of CSC Nanchang as a specified onshore asset.

Following these changes, the early expiration date, the early consent fee and the late consent fee are no longer applicable.

The company also said that some other modifications were made to the proposed amendments, though the specific changes were not reported in the Dec. 11 notice.

China South City is offering a consent fee of $5 per $1,000 principal amount of notes for holders who delivered consents by the extended expiration date. In addition, the company added an additional incentive fee of $10 for each $1,000 principal amount to be paid to each holder who delivered their consent by the extended expiration date.

Originally, those delivering consents after the early deadline of 11 a.m. ET on Dec. 11 but before the expiration date were only eligible to receive $1.50 per $1,000 principal amount of notes. This is no longer in effect.

The original expiration time was Dec. 13.

Payment of the consent fee is expected to be made on Dec. 19 and is conditioned on the delivery of consents from holders of at least 75% of the outstanding principal amount of each series.

The incentive fee payment date will be Jan. 31.

All consents that have been delivered remain valid and are irrevocable.

As previously reported, the main purpose of the consent solicitation is to, among other things, (i) improve the company’s liquidity and cash flow management by extending the maturity and lowering the interest rates of the notes and implementing principal payments in installments; and (ii) give the company additional time to cure the November interest non-payment by providing a waiver until July 19, 2024 and of all past defaults that arose as a consequence.

The interest payment due on Nov. 20 with respect to the July 2024 notes has not been paid, which will lead to an event of default if not paid by Dec. 20, unless the waiver is granted. The company stated it may not have the ability to make interest payments by Dec. 20.

The company emphasized that it has been actively seeking to obtain financing and working on generating sufficient cash flow to meet its financial commitments. As part of these efforts, China South City is conducting the consent solicitation to allow more time and operational flexibility to obtain the financing.

Noteholders as of the record date of Dec. 1 were invited to participate.

Haitong International Securities Co. Ltd. and China Citic Bank International Ltd. are the solicitation agents.

D.F. King Ltd. (+852 3953 7208, +44 20 7920 9700, ChinaSouthCity@dfkingltd.com, www.dfkingltd.com/chinasouthcity) is the tabulation and information agent.

Hong Kong-based China South City develops and operates integrated logistics and trade centers in China.

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