Guangdong-Hong Kong Greater Bay seeks to extend maturity, cut interest on 7% notes due 2026

By Wendy Van Sickle

Columbus, Ohio, Oct. 11 – Guangdong-Hong Kong Greater Bay Area Holdings Ltd. is soliciting consents from holders of its 7% senior notes due 2026 (ISIN: XS2609459123) to extend the maturity date and reduce the interest rate, among other things, as the company expects it may not be able to make a coming coupon payment amid dismal sales, according to an announcement.

On April 28 and Sept. 6, the company issued $413,578,609 and $25,958,911 principal amount of the notes, respectively, which were consolidated and formed a single class. As of Oct. 11, $439,537,520 of the notes were outstanding.

Specifically, the issuer is seeking to push out the maturity date by three years to April 28, 2029, which it said is an effort to alleviate the liquidity pressure on the company.

Further, in order to preserve its cash resources for business operations in the near term, the company is seeking to: reduce the interest rate to 4½%; amend the interest payment dates to once a year on April 28, rather than semiannually on April 28 and Oct. 28; accrue interest on the notes from, and including, April 28, 2024 instead of April 28, 2023; pay the interest accrued from, and including, April 28, 2024 to, but excluding, April 28, 2025 in PIK interest only; and pay the interest accrued from, and including, April 28, 2025 to the maturity date in cash.

Finally, in line with the proposed amendment to extend the maturity of the notes, the company is also seeking to remove the scheduled mandatory redemption obligations and pay all the principal amount of the notes, unless redeemed or repurchased and cancelled earlier, on the maturity date.

Background

Since the second half of 2021, the Chinese real estate industry has been facing severe difficulties along with repeated outbreaks of Covid-19, and Guangdong-Hong Kong Greater Bay has been under enormous operating, financing and cash flow pressure.

The company said it has “actively implemented various measures to improve its liquidity, including through accelerating sales and cash collection, reducing noncore and unessential operations and expenses and reducing the remuneration and benefits of the senior management team.”

Also, with the support of noteholders, the company completed an exchange offer under which the notes were issued in April, but the operating environment affecting the Chinese real estate industry has not since improved, and the company said its sales performance during that time has been “dismal,” even during the traditional peak sales season known as the “Golden September and Silver October.”

The company recorded a net loss of about RMB 740 million for the six months ended June 30. Its asset disposals and collection of other receivables were also slow. As a result, the company said it may not be able to pay the interest on the notes due on Oct. 28.

The company anticipates that the market condition in the Chinese real estate industry will remain under pressure for the coming years, and, in the absence of a sharp recovery, it is cautious about its liquidity in the near term.

Details

The record date for participation in the consent bid is Oct. 10.

The solicitation will expire at 11 a.m. ET on Oct. 20.

Subject to some conditions of the consent solicitation, the company will make an upfront principal repayment of $1 in cash per $1,000 principal amount of notes to all holders of record as of the record date. After making the payment, the company will cause notes in the principal amount equal to the payment to be canceled. The payment date is expected to be Oct. 25.

Kroll Issuer Services Ltd. (+44 20 7704 0880, 852 2281 0114 or youngo@is.kroll.com) is the information and tabulation agent.

The state-owned investment holding company is based in Guangdong, China.

© 2015 Prospect News.
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