China Precious Metal lacks funds to settle bid for 7.25% convertibles

By Susanna Moon

Chicago, Jan. 28 – China Precious Metal Resources Holdings Co., Ltd. said it is unable to fund settlement of the consent solicitation for its HK$1,028,000,000 7.25% convertible bonds due 2018.

Settlement had been set for Jan. 29, but “due to restrictions on capital flow from the PRC, the company is not in a position to provide payment to the bondholders on the settlement date,” according to a company announcement.

The supplemental trust deed will not be executed on Jan. 29, as originally planned, and the company is considering other options, the release noted.

The company said on Jan. 12 that holders had consented to some proposed amendments to the bonds at the bondholder meeting.

As previously reported, the amendments were supposed to help the company manage cash flow. Holders were asked to consider some changes to the bonds to extinguish their Feb. 4 put right, which the issuer had expected a majority of bondholders to exercise.

The amendments would also lower the conversion price and subject it to periodic resets.

The company sought consents through an extraordinary resolution and it gave bondholders the option to agree to substitute each bond with consent shares or full consent shares.

As noted before, consent shares are ordinary shares in exchange for a bondholder’s outstanding principal amount of bonds held plus accrued interest following payment of a principal paydown amount plus accrued interest. The principal paydown amount is a redemption amount equal to HK$350,000 per HK$1 million principal amount.

Full consent shares are ordinary shares in exchange for a bondholder’s full outstanding principal amount of bonds held plus accrued interest.

Bondholders may elect to substitute bonds for consent shares or full consent shares through 5:59 p.m. ET on Jan. 19.

For passage, the amendments required at least 75% of the votes represented at the bondholders’ meeting. Votes representing HK$1.01 million, or 98.44%, of the bonds were received with 97.92% of votes cast supporting the amendments.

Adopted amendments

The amendments to the bonds include the following:

• A reduction in the conversion price. The reduced conversion price is calculated based on a 25% premium to the reference volume-weighted average price;

• A reset to the conversion price on Aug. 4, 2016 and Feb. 4, 2017. If the volume-weighted average price during a period of 20 consecutive trading days is less than the conversion price prevailing on the last day of that period, the conversion price will be reset, subject to a minimum price reset equal to the reference share price;

• A change to the call option. The company may at any time on or after Feb. 4, 2016 to and including Feb. 4, 2017 redeem the outstanding bonds in full at 105 plus accrued interest to the redemption date.

At any time after Feb. 4, 2017, the company may redeem (a) an amount of bonds such that after the redemption, the outstanding amount of bonds remaining is two-thirds of the aggregate principal amount at Feb. 4, 2017, provided the VWAP for a period of 30 consecutive days ending on the date that is no more than five trading days prior to notice of redemption is at least 130% of the conversion price; (b) an amount of bonds such that after the redemption, the outstanding amount remaining is one third of the aggregate amount at Feb. 4, 2017, provided the VWAP for a period of 30 consecutive trading days ending on the date that is no more than five days prior to notice of redemption is at least 140% of the conversion price; and (c) all remaining bonds outstanding, provided the VWAP for a period of 30 consecutive trading days ending on the date no more than five trading days prior to notice of redemption is at least 150% of the conversion price; and

• Removal of the bondholders’ put option.

Daiwa Capital Markets Hong Kong Ltd. is the solicitation agent.

The Hong Kong-based precious metals mining company priced HK$1,028,000,000 of the bonds in January 2013.

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