KWG begins exchange offer for three notes, seeks consents for seven

By Marisa Wong

Los Angeles, Sept. 2 – China’s KWG Group Holdings Ltd. began an exchange offer for three series of notes and a consent solicitation relating to one of those three series as well as a separate consent solicitation for six other series of notes, according to a company announcement.

KWG is offering to exchange

• At least $810 million, or 90%, of the aggregate outstanding principal amount of its $650 million 6% senior notes due September 2022 (ISIN: XS1556169206) and $250 million 5.2% senior notes due September 2022 (ISIN: XS1685542141); and

• At least $560 million, or 80%, of the outstanding principal amount of its $700 million 7 7/8% senior notes due September 2023 (ISIN: XS1954740285).

The company is offering to exchange the existing notes (“exchange notes”) for new 6% senior notes due January 2024 and 7 7/8% senior notes due August 2024. The two September 2022 notes will be exchanged for January 2024 notes, and the September 2023 notes will be exchanged for August 2024 notes.

KWG is also soliciting consents from holders to some proposed waivers and proposed amendments to the indenture governing the September 2023 notes.

The purpose of the exchange offer and consent solicitation for the 2022 and 2023 notes is to improve the company’s overall financial condition, extend its debt maturity profile, strengthen its balance sheet and improve cash flow management.

Exchange offer details

The exchange consideration for each $1,000 principal amount of September 2022 notes (both series) will consist of $950 principal amount of January 2024 notes, $50 upfront principal repayment in cash and $5 in cash as an incentive fee.

No accrued interest will be paid on either series of September 2022 notes.

The exchange consideration for each $1,000 of September 2023 notes is $1,000 principal amount of August 2024 notes and $5 in cash.

Accrued interest will also be included in the exchange consideration for the September 2023 notes.

Holders may not tender their September 2023 notes without delivering consents and vice versa.

In the event the exchange offer for the September 2023 notes is not completed, holders tendering September 2023 notes will still be entitled to receive a consent consideration of $5 in cash.

The exchange offer and consent solicitation are subject to some conditions, including the minimum acceptance amount being tendered.

The exchange offer and related consent solicitation expire at 11 a.m. ET on Sept. 9.

Settlement of the new January 2024 notes is expected to occur on Sept. 14.

Listing of the new January 2024 notes on the Singapore Exchange will be on Sept. 15.

Settlement of the new August 2024 notes will occur on or around Sept. 30.

Listing of the new August 2024 notes on the Singapore Exchange will be on Oct. 3.

Concurrent consent bid

Concurrently, the company is soliciting consents from holders of the following notes (“consent notes”) to some proposed waivers and proposed amendments to the respective indentures:

• $458 million 7.4% senior notes due March 2024 (ISIN: XS2034561584);

• $625 million 5 7/8% senior notes due November 2024 (ISIN: XS1716631301);

• $300 million 5.95% senior notes due August 2025 (ISIN: XS2214229887);

• $400 million 6.3% senior notes due February 2026 (ISIN: XS2257830716);

• $378 million 6% senior notes due August 2026 (ISIN: XS2343325622); and

• $300 million 7.4% senior notes due January 2027 (ISIN: XS2100654586).

The main purpose of the concurrent consent solicitation is to waive events of default and any consequential breaches or defaults arising from the non-payment of interest on the March 2024 notes on Sept. 5 and to amend the events of default provision in the consent notes indenture to carve out any default or event of default in respect of the consent notes as a result of a default or event of default occurring under the exchange notes and to make other related changes and some other updates.

Approval of the proposed waiver and amendment with respect to the consent notes requires consents from holders of a majority in the aggregate principal amount of the outstanding consent notes.

The company noted that if it fails to obtain the required consents to effect the proposed waiver and amendment, the increase of cross-default risk as a result of any default of the exchange offer notes may adversely affect its flexibility in pursuing new business opportunities and new sources of capital, which may have a material and adverse effect on its business and financial condition, which in turn may have a material and adverse impact on its ability to service the consent notes and seek refinancing.

Consent bid details

KWG is offering a consent fee of $2.50 per $1,000 principal amount.

Holders of record as of Sept. 1 are eligible to participate.

Consents are due by 11 a.m. ET on Sept. 9.

Consents may not be revoked.

Payment will be made as soon as practicable after the consent expiration deadline and the conditions to the consent solicitation are met. Settlement is expected to occur on Sept. 14.

Morrow Sodali Ltd. (+44 20 4513 6933, +852 2319 4130; KWG@investor.morrowsodali.com; https://projects.morrowsodali.com/kwgexchange; https://projects.morrowsodali.com/kwgconsent) is the information, exchange and tabulation agent.

KWG Property is a developer based in Guangzhou, China.

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