China Green holders OK offer to cancel 3% bonds at May 13 meeting

By Marisa Wong

Madison, Wis., May 13 - China Green (Holdings) Ltd. said that bondholders approved proposals made under the second consent solicitation for its RMB 1.35 billion of dollar-settled 3% convertible bonds due April 12, 2013.

As previously announced, the company asked bondholders to accept new higher-coupon notes and cash in exchange for cancellation of the 3% convertible bonds.

Consents were solicited through an extraordinary resolution at a meeting held on May 13. The company issued a consent solicitation memorandum to bondholders on May 1.

Holders of RMB 1,128,600,000 principal amount, or 87.6%, of the outstanding convertibles attended Monday's meeting, satisfying the quorum of two or more holders holding at least 75% of the bonds in principal amount.

Of the 11,286 votes cast at the meeting, 11,234 votes (99.5% of total votes cast) were in favor of the resolution and 52 votes were against the resolution.

With the resolution passed, bondholders will receive for each RMB 100,000 principal amount of 3% bonds

• RMB 40,000 principal amount of dollar-settled 7% secured convertible bonds due 2016;

• RMB 40,000 principal amount of dollar-settled 10% secured convertible bonds due 2016;

• A cash component of RMB 26,387.74; and

• Default interest payable from April 12 to the settlement date, which is expected to be June 21, of RMB 394.44.

The company previously announced that it planned to issue a total of RMB 515.28 million of 7% bonds and RMB 515.28 million of 10% bonds and determined that the cash component to be paid for all 3% bonds to be extinguished is RMB 339,926,866. Total default interest is expected to total RMB 7,586,081.

The company said on Monday that issuance of the new 7% and 10% bonds is subject to, among other things, the execution of some transaction documents, as well as shareholders' approval at a general meeting to be held as soon as possible.

Terms of new bonds

The conversion prices for the proposed 7% bonds and 10% bonds have been set at HK$1.34 and HK$11.244, respectively.

The 7% bonds will have no amortization. For the 10% bonds, the company will redeem RMB 9,343 of each bond on April 12, 2014, RMB 17,129 of each bond on April 12, 2015, RMB 9,343 of each bond on Oct. 12, 2015 and RMB 4,185 of each bond on April 12, 2016.

Background to second meeting

The company was required to redeem the outstanding bonds at 106.388 plus accrued interest on the maturity date of the 3% bonds. As of April 14, the bonds had not been redeemed. As a result, the company was in breach of its redemption obligation unless it obtained a waiver.

Once the bond trustee gives notice of default at the request of bondholders holding at least 25% of the outstanding bonds, the bonds become immediately due and payable, the company previously noted.

On April 15, the company said it was negotiating with bondholders for a waiver and a revised restructuring offer. The preliminary terms of the updated restructuring were as follows:

• The company will issue two new tranches of senior secured convertible bonds totaling RMB 1,370,500,000 (roughly 106.388% of the outstanding amount of the existing bonds);

• The size of each three-year tranche will be RMB 513.75 million;

• The conversion price for the first tranche will be HK$1.34, and the conversion price for the second tranche will be $11.244;

• The first tranche will carry a coupon of 7%, and the second tranche will have a coupon of 10%; and

• The company will make an upfront cash repayment of RMB 342.9 million (about 25% of the total value of the new tranches) as soon as possible once bondholders approve the offer.

As of April 21, holders of 79.04% of the bonds had agreed in principle to the terms of the new bonds, and holders of 74.34% of the bonds had signed a standstill agreement for the period between April 12 and May 13. Holders of 4.7% had agreed not to enforce their rights against the company during the standstill period but had not signed the standstill agreement.

Original consent solicitation

China Green canceled its first consent solicitation related to the 3% convertibles because there were not enough bondholders to form a quorum at the meeting held on April 12.

Only bondholders representing RMB 869.6 million principal amount, or just over 67.5%, of the outstanding bonds attended the meeting. The meeting required the attendance of two or more bondholders representing at least 75% of the principal amount of the bonds.

In order to amend the bonds, 75% of the votes cast at the bondholders' meeting had to be in favor of the changes.

As reported, the company sought bondholders' approval to

• Reduce the outstanding principal amount of the bonds to RMB 998.57 million by paying RMB 289.63 million on April 12;

• Extend the maturity date to April 12, 2016;

• Increase the interest rate to 7.79%; and

• Include an additional redemption provision under which the company would redeem RMB 9,315 of each bond on April 12, 2014, RMB 17,078 of each bond on April 12, 2015, RMB 9,315 of each bond on Oct. 12, 2015 and RMB 41,808 of each bond on April 12, 2016.

The agent for the first consent solicitation was Deutsche Bank AG (contact Andrew Waddell at +852 2203 6930 or andrew.waddell@db.com or Jeremy Lau at +852 2203 6151 or jeremy.lau@db.com).

Daiwa Capital Markets Hong Kong Ltd. was the agent for the second consent solicitation.

China Green is a Hong Kong-based produce farmer and processor.

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