Logan: 77.8% of senior noteholders agree to credit support agreement

By Devika Patel

Knoxville, Tenn., March 26 – Logan Group Co. Ltd. said that holders representing over 77.8% of the dollar-denominated offshore senior notes have already acceded to a credit support agreement.

As previously reported, the company signed the agreement on Jan. 12.

The company is addressing a restructuring of $3.369 billion principal amount of senior notes, namely the following:

• 7½% senior notes due Aug. 25, 2022 (ISIN: XS1954961295);

• 5¼% senior notes due Feb. 23, 2023 (ISIN: XS1618597535);

• 6½% senior notes due July 16, 2023 (ISIN: XS2027337786);

• 6.9% senior notes due June 9, 2024 (ISIN: XS2050914832);

• 4.15% senior notes due Aug. 5, 2024 (ISIN: XS2373662555);

• 4¼% senior notes due Sept. 17, 2024 (ISIN: XS2231563805);

• 5¾% senior notes due Jan. 14, 2025 (ISIN: XS2099677747);

• 4¼% senior notes due July 12, 2025 (ISIN: XS2309743578);

• 5¼% senior notes due Oct. 19, 2025 (ISIN: XS2206313541);

• 4.7% senior notes due July 6, 2026 (ISIN: XS2342970402);

• 4.85% senior notes due Dec. 14, 2026 (ISIN: XS2272214458); and

• 4½% senior notes due Jan. 13, 2028 (ISIN: XS2281303896).

The total offshore debt, as of June 30, 2023, to be restructured was $6.649 billion (excluding accrued interest) and a shareholder loan of $1.346 billion. The company had $350 million of 7% perpetual securities outstanding.

Support agreement

Under the agreement, creditors would have four options.

The first option is a cash offer. Debts may be exchanged for $15 in cash for $100 principal amount of existing notes, with accrued interest waived. Under the first option, up to $1.267 billion of debt may be exchanged for cash, or an aggregate cash settlement of $190 million.

Under the second option, $100 of existing notes may be exchanged for $100 of new debt, broken down into $60 of mandatory convertible one-year bonds and $40 of priority notes. Again, accrued interest would be waived.

The option two mandatory convertibles could be converted into ordinary shares at HK$6.00 per share on the issue date or at HK$4.25 per share on the first anniversary.

Interest on the six-year priority notes would be 1¼% for the first two years, in cash, and then 3¾% starting in year three, with the company’s option to defer cash interest to the fourth year.

Up to $1.2 billion principal amount of option two mandatory convertibles could be issued, along with up to $800 million principal amount of priority notes.

Still in option two, investors would receive mandatory convertible bonds for the accrued interest through Dec. 31, 2023. The convertibles would have a one-year term and could be converted into common shares at HK$9.00 per share, either on the original issue date or on the first anniversary. Any other interest would be waived.

The primary source of repayment for the priority notes would be a portion of proceeds generated from offshore projects.

Under option three, noteholders may convert up to $800 million principal amount of notes into mandatory convertible bonds. It would be an even exchange, with $100 of existing notes converted into $100 of mandatory convertibles.

Relating to option three, holders could convert their bonds into equity at a conversion price of HK$4.25 per share on the original issue date or wait until mandatory conversion of the bonds on the first anniversary at a conversion price of HK$3.00 per share.

Under option four, each $100 principal amount of existing notes would be converted into $100 of long-term notes.

The new notes would have a nine-year term with amortization starting in the sixth year.

Interest would be at 3¾% from year one to year four, and 4% from year five to year nine. All interest would be paid in kind for year one and year two. In year three, 3¼% may be paid in kind, at the election of the company. In year four, 2¼% may be paid in kind. Full cash payments start in year five.

Further, under option four, the company has the right to defer amortization payments and interest payments from the third year to the fourth year.

Under option four, accrued interest through Dec. 31, 2023 would become mandatory convertible bonds. Any other accrued interest would be waived.

Controlling shareholder

The controlling shareholder, with a $1.346 billion loan to the company, has indicated the allocation of that loan related to the choices above.

The shareholder is allocating $200 million of the loan for the option two mandatory convertible bonds and the priority notes and $200 million into option three mandatory convertibles, to enable the company to deleverage.

The balance of the loan will be exchanged for long-term notes with nine-year and 10-year tenors. Interest will be at 2%, all paid in kind.

Details

The restructuring will be implemented by way of scheme of arrangement in Hong Kong.

Consenting creditors will be eligible to receive a CSA fee for 0.2% of the aggregate principal amount of notes held by each consenting creditor.

The fee will be payable on the effective date of the restructuring.

Creditors need to vote their entire holdings to receive the fee and need to hold notes at 4 a.m. ET on March 28 and still hold the notes at the record time.

The company’s advisers are Kroll (Hong Kong) Ltd. (dl.project.longxiang@kroll.com) and Haitong International Securities Co. Ltd. (project.logan@htisec.com), as financial advisers, and Sidley Austin, as legal adviser.

Advisers for the ad hoc group are PJT Partners (HK) Ltd. (ProjectLupine@pjtpartners.com) as financial adviser and Freshfields Bruckhaus Deringer (ProjectLupine@freshfields.com) as legal adviser.

Based in Shenzhen, China, Logan is a property developer and construction company.

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