REXlot revises bid to amend convertibles’ put terms; holder weighs in

By Susanna Moon

Chicago, Oct. 7 – REXlot Holdings Ltd. said it modified its consent solicitations to amend the put provision in its 4.5% convertible bonds due 2019 and 6% convertible bonds due 2016.

REXlot revised the proposals by including an early redemption obligation, according to a company press release.

Noteholder meetings for the revised proposals have been set for Oct. 29.

Quorum at the new meeting requires a single voter representing at least 66 2/3% of the aggregate principal amount of the outstanding bonds for each series. For the measure to pass, holders of a majority of at least three quarters of the votes cast must be in favor.

The revised proposals do not extend the conversion rights under the bonds, because the maturity of the bonds will not be extended, nor does it modify conversion rights in favor of the bondholders, the press release noted.

As reported on Sept. 22, the company is seeking to extend the time period for making payment on the bonds and to amend the default provisions so that it can sell assets.

As previously reported, on Aug. 20 REXlot’s convertibles became putable because the company’s stock had been suspended from trading for 30 consecutive trading days.

Under the terms of the bonds, REXlot will be required to repay any bonds put back to the company on Nov. 2 at par plus accrued interest.

As of Aug. 20, the company had HK$1.9 billion of the 4.5% convertibles outstanding and HK$347.7 million of the 6% convertibles.

Holder concessions

The company said that Chan How Chung, an executive director and a substantial shareholder, as well as a holder of HK$300 million of the 2019 bonds is providing as a sign of support to the company a block voting instruction in favor of the revised proposal and, if it is passed, an unsecured and interest-free shareholder’s loan to the company for HK$100 million, with a one-year term to help fund the company’s partial redemption obligations.

Chung also will provide an unsecured and interest-free shareholder’s loan in the amount equal to the holder’s consent fee, expected to be about HK$3 million, with a one-year term to provide for the company’s general working capital.

The holder also will give another unsecured shareholder’s loan in the amount equal to the partial redemption principal payment, expected to be about HK$15 million, with a one-year term with an interest rate equal to the coupon rate of the 2019 bonds, to provide for general working capital.

If the holder receives an early redemption payment for the 2019 bonds, the holder will provide another unsecured shareholder’s loan to the company in the amount equal to the early redemption principal payment, with a one-year term and an interest rate equal to the coupon rate of the 2019 bonds, to provide for general working capital and, if needed, to fund the company’s redemption and repayment obligations under the bonds.

The holder also agreed not to exercise the put option for the 2019 bonds that it holds.

Solicitation background

Trading in REXLot’s shares was suspended on June 24 at the company’s request and will remain suspended “pending the release of a clarification announcement.”

REXlot said the suspension was due to an “unexpected report issued by Anonymous Analytics on 24 June 2015, which contained errors of fact, misleading statements and unfounded accusations against the company.”

It added that it is “facing a near-term cash flow mismatch issue, primarily due to various constraints for the group to remit funds out of mainland China.”

Consequently, REXlot said, “it will be challenging for the company to obtain adequate offshore cash resources” to make the full payment due on Nov. 2.

The proposed amendments will give the company more time to raise offshore cash resources.

Under the terms of the consent solicitation, REXlot is proposing to pay 5% of the principal amount of all of the convertibles plus accrued interest on Nov. 30.

The remaining principal amount for any bonds put back to the company would be paid on March 31, 2016. Bondholders would have until 30 days before that date to exercise the put.

In addition, REXlot is seeking a carve out under the events of default to allow it to dispose of assets, businesses or operations without triggering a default as long as the net proceeds are directed primarily toward redeeming or repaying the convertibles.

Meetings of bondholders to approve the changes will be held at 10 p.m. ET on Oct. 13 for the 6% convertibles and 10:30 p.m. ET on Oct. 13 for the 4.5% convertibles.

To make the changes, holders of at least 66 2/3% of the principal amount of the outstanding bonds must be represented at the meeting and at least 75% of the votes cast must be in favor.

Holders who vote for the amendments will receive a consent fee of 1% of the principal amount of bonds.

Daiwa Capital Markets Hong Kong Ltd. is solicitation agent.

Based in Hong Kong, REXLot provides machines and services to the Chinese lottery market.

© 2015 Prospect News.
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