Sunkwan offers to swap 2022 notes, seeks consents to amend 2023 notes

By Marisa Wong

Los Angeles, July 8 – China’s Sunkwan Properties Group Ltd. has begun an offer to exchange at least $189 million, or 90%, of its $210 million outstanding 12¼% senior notes due 2022 (ISIN: XS2363837258) held by non-U.S. persons outside the United States for new notes.

The company is offering $1,000 of new notes for each $1,000 of existing notes tendered for exchange, according to a company announcement on Friday.

The new notes will have a tenor of 364 days and will bear interest at 12¼%.

The company will also pay capitalized interest.

The exchange offer expires at 11 a.m. ET on July 14.

The company said it reserves the right to accept less than the minimum acceptance amount or to accept none of the notes tendered for exchange.

Settlement is expected to occur on July 18.

Listing of the new notes on the Singapore Exchange is slated for July 19.

The company said the main purpose of the Regulation S exchange offer is to improve its overall financial condition, extend its debt maturity profile, strengthen its balance sheet and improve cash flow management.

Consent solicitation

At the same time, Sunkwan is soliciting consents to amend its $160.2 million 13½% senior notes due 2023 (ISIN: XS2417707374).

The company is seeking to amend the events of default provision in the 2023 notes indenture to carve out any default or event of default in respect of the 2023 notes as a result of a default or event of default occurring under the 2022 notes and to amend the insolvency events of default in line with the terms of the proposed new notes to be issued under the exchange offer.

The exchange offer and consent solicitation are inter-conditional.

China Construction Bank (Asia) Corp. Ltd. is the trustee for the 2023 notes.

Background

Against the backdrop of the adverse market conditions and the Covid-19 outbreaks, Sunkwan anticipates that the market condition in the real estate sector will remain under pressure in 2022, according to the company announcement.

The company said its management has demonstrated its resolution and commitment to mitigate the effects of the recent adverse market conditions. In January, the company completed an exchange offer for its 12¾% senior notes due January 2022, thereby extending the maturity date to January 2023.

The company said it strives to meet its financial commitments through, among others, extension or refinancing of its existing debt, opportunistic financing and expenditure conservation. The current exchange offer and consent solicitation are part of these efforts.

If neither the exchange offer nor the consent solicitation are successful, the company may not be able to fully repay the 2022 notes, and the company’s other efforts to meet its financial commitments may also fall short. If that is the case, the company may have to consider an alternative debt restructuring exercise.

Haitong International Securities Co. Ltd. (fax: +852 2840 1680; attn.: debt capital markets) is the solicitation agent for the consent solicitation and dealer manager for the exchange offer.

D.F. King Ltd. (+44 20 7920 9700, +852 3953 7231; sunkwan@dfkingltd.com; https://sites.dfkingltd.com/sunkwanconsent; https://sites.dfkingltd.com/sunkwan) is information and tabulation agent.

The property developer is based in Shanghai.

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