Sino-Ocean bondholders vote in favor of three resolutions, reject two

By Marisa Wong

Los Angeles, Aug. 2 – Sino-Ocean Group Holding Ltd. issued an update on Monday relating to the bonds issued by subsidiary Sino-Ocean Holding Group (China) Ltd., announcing results of two bondholder meetings.

A meeting of bondholders was convened from July 27 to Aug. 1.

Three resolutions were proposed at the meeting, two of which were not passed and one of which was passed. The results are as follows:

• For the resolution to amend the rules of the meetings of bondholders, holders of 28.1063% of the bonds voted in favor, 48.9452% voted against, and 22.9485% abstained from voting;

• For the resolution to adjust the arrangement for the repayment of principal and interest of the bonds and the provision of credit enhancement measures and to add the terms of a grace period for the repayment of principal and interest of the bonds, 23.3343% voted for, 53.7172% voted against, and 22.9485% abstained; and

• For the resolution demanding that the issuer fully repay the principal and interest of the bonds on schedule, 53.7222% voted for, 6.2026% voted against, and 40.0752% abstained.

Because less than 50% of the votes was cast in favor of each of the first two resolutions, those two resolutions were not passed. Meanwhile, as more than 50% of the votes was cast in favor of the third resolution, that resolution was passed.

A second meeting of bondholders was convened from July 31 to Aug. 1. As announced on Tuesday, the voting deadline for the second meeting was extended by seven hours.

The final voting results for the second meeting were as follows:

• For the resolution relating to the exemption of deadline for the notice of the second meeting and the submission of provisional proposal and vote-monitoring related procedures, 51.7173% of the holders voted in favor, 28.4808% voted against, and 19.8019% abstained; and

• For the resolution adding the terms of a grace period for the repayment of principal of the bonds, 50.3098% voted for, 29.8883% voted against and 19.8019% abstained.

With more than 50% of the votes cast being in favor of each of the resolutions, both resolutions at the second meeting were passed.

Grace period

As of Aug. 2, the issuer has repaid the full amount of the accrued interest of the bonds for the period from Aug. 2, 2022 to Aug. 1, 2023 but has not yet repaid the principal.

Holders had approved at the first meeting the resolution demanding that the issuer fully repay the principal and interest of the corporate bonds on schedule. However, the company is currently facing liquidity difficulties, so it was not able to repay the principal on Aug. 2.

The grace period being approved by bondholders at the second meeting means, though, that no event of default is expected to occur as of the end of Aug. 2.

However, if the company fails to make full repayment of the principal and accrued interest by Sept. 1, it is expected that there will still be an event of default once the grace period expires on Sept. 1, which may result in demand by the holders for immediate repayment of principal and interest.

If any event of default occurs for the bonds, it will constitute one of the cross-default events for other series of notes. Cross-default events or other events of default or non-payment provisions under the group’s other debt might also be triggered as a result.

The issuer said in its announcement on Wednesday, it “expresses sincere apologies to investors and undertakes that it will not evade and revoke debts and will actively seek various means to properly mitigate the debt issues.”

The company explained that there remains insufficient demand for housing. At the same time, affected by its internal property launch schedules, the company has recently been subject to enormous pressure in operating cash flow. As a result of the year-on-year decline in sales, cash receipts continued to decrease and coupled with serious limitations on the use of funds and material uncertainty in asset disposal, the company was subject to insufficient liquidity on a temporary basis and the book amount unrestricted monetary cash fell short of the amount of the principal of the corporate bonds.

The company said it will continue to evaluate and optimize the repayment plan for the principal of the bonds and communicate with investors to try to reach an agreement with investors through effective measures as soon as possible.

The company will continue to make active efforts in all aspects of operation and management and accelerate cash collection.

Trading of the bonds will be suspended from the Shanghai Stock Exchange on Aug. 2, and transfer of the bonds will be conducted beginning Aug. 7.

The property developer is based in Hong Kong.

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