Powerlong enters restructuring support agreement with some creditors

By Marisa Wong

Los Angeles, Feb. 23 – Powerlong Real Estate Holdings Ltd. announced on Friday it has entered into a restructuring support agreement with some initial participation creditors, including all members of an ad hoc group of holders of the scheme debt and some lenders of its existing loans, who hold about 30.3% of the aggregate outstanding principal amount of the in-scope debt.

Prior announcement

Powerlong made an announcement on Dec. 21 saying it had made significant progress on a plan for a holistic solution to some of its offshore debt, which it referred to as the scheme debt.

Over the few weeks preceding the Dec. 21 announcement, the company had been working with its professional advisers to come up with a plan that aims to consider creditors’ existing rights and treat all creditors fairly, secure a long-term sustainable capital structure and to further stabilize the group’s operations as well as to protect the rights and interests of all of the company’s stakeholders.

The company had been actively engaged in constructive communications with members of the ad hoc group of holders of the scheme debt regarding the holistic solution.

On Dec. 21 the company entered into a restructuring term sheet with the ad hoc group who hold about 27% and 35.6% of the aggregate outstanding principal amount of the scheme debt and the company’s existing dollar-denominated senior notes (the first nine series listed under “in-scope debt” below), respectively.

The parties agreed to work together on coming up with detailed terms under a restructuring support agreement on or prior to Feb. 23.

Next steps

According to the latest announcement, the RSA supersedes the term sheet but the major economic terms of the RSA are substantially the same as the term sheet, except that some additional credit enhancements have been offered to the mandatory convertible bonds, new notes and new loan.

The holistic solution is expected to be implemented through schemes of arrangement in Hong Kong or other applicable jurisdictions. The company said it will begin the process of implementing the holistic solution on terms set forth in the RSA as soon as possible.

The company said that because broad-based support is required to facilitate successful implementation of the holistic solution, it is asking all holders of the in-scope debt who have not signed the RSA to accede to the RSA as soon as possible.

Specifically, the company is requesting that these holders accede to the RSA as additional participating creditors by delivering to the information agent a completed accession letter and participating debt notice via the transaction website (https://deals.is.kroll.com/powerlong) as well as submitting an electronic consent instruction to the relevant clearing system with respect to all of their in-scope debt prior to the consent fee deadline.

Kroll Issuer Services Ltd. (powerlong@is.kroll.com; +852 2281 0114; attn.: Mu-yen Lo / Kevin Wong) is the information agent.

Consent fee

Each participating creditor who holds participating debt as of the early consent fee deadline, 4 a.m. ET on March 24, will receive an early consent fee in cash of 0.3% of the early eligible participating debt.

Each participating creditor who holds participating debt as of the base consent fee deadline, 4 a.m. ET on April 26, will receive a base consent fee in cash of 0.15% of the base eligible participating debt.

The consent fee will be payable on or prior to the restructuring effective date.

The restructuring effective date will be no later than Sept. 30, 2024, the longstop date, and will occur as soon as practicable and within 10 business days of the conditions to the RSA being met or waived.

Restructuring consideration

The scheme consideration will consist of one or a combination of different options at the scheme creditor’s selection, including (i) cash and securities, which include ordinary shares of Powerlong Commercial Management Holdings Ltd. currently held by Powerlong and mandatory convertible bonds convertible into the shares of Powerlong, (ii) new medium-term notes, (iii) new long-term notes and (iv) a new loan.

In particular, the restructuring consideration for each scheme creditor will consist of one or a combination of the following options:

• Option 1, a fixed combination of cash and securities as follows: 4.5% of 11/60 of the entitlement in cash and 95.5% of 11/60 of the entitlement in ordinary shares, plus 4.5% of 49/60 of the entitlement in cash and 95.5% of 49/60 of the entitlement in mandatory convertible bonds. Beginning one year after the issue date, 25% of the original principal amount of the convertibles will be subject to mandatory conversion each year at a conversion price of HK$3.35;

• Option 2, new medium-term notes that will have a tenor of five years and a coupon of 2¾% that steps up to 3% after 1.5 years, to 3¼% after three years and to 3½% after four years. Only 1% of the interest for the first three years will be payable in cash, and the balance will be paid in kind. Interest after the three years will be paid entirely in cash. The medium-term notes will be subject to mandatory redemption provisions;

• Option 3, new long-term notes with a tenor of 7.5 years. The coupon is 2% initially, stepping up to 2½% after four years and to 2¾% after six years. Interest will be PIK-only for the first four years and entirely in cash after that. The long-term notes will be subject to mandatory redemption provisions; or

• Option 4, new loan that will be repayable in semiannual installments. Interest will accrue at 2% for the first three years, stepping up to 2¼% until 4.5 years after the issue date, to 2½% until six years after the issue date and to 2¾% after that. For the first three years, only ½% is payable in cash for the first three years, with the balance payable as PIK interest.

In-scope debt

The proposed restructuring affects claims relating to the following in-scope debt with Powerlong as issuer or borrower:

• The New York law-governed 4% senior notes due July 2022 (ISIN: XS2368100033) with $4,105,000 outstanding;

• The New York law-governed 7 1/8% senior notes due November 2022 (ISIN: XS2078556342) with $20,652,000 outstanding;

• The New York law-governed 6.95% senior notes due July 2023 (ISIN: XS2030333384) with $18,515,000 outstanding;

• The New York law-governed 4% senior notes due July 2024 (ISIN: XS2500700633) with $183,220,506 outstanding;

• The New York law-governed 7 1/8% senior notes due January 2026 (ISIN: XS2500700716) with $266,210,950 outstanding;

• The New York law-governed 6.95% senior notes due December 2025 (ISIN: XS2647488878) with $389,440,450 outstanding;

• The New York law-governed 6¼% senior notes due August 2024 (ISIN: XS2213954766) with $500 million outstanding;

• The New York law-governed 5.95% senior notes due April 2025 (ISIN: XS2250030090) with $535 million outstanding;

• The New York law-governed 4.9% senior notes due May 2026 (ISIN: XS2341882913) with $200 million outstanding;

• The New York law-governed 6½% senior notes due August 2024 (with the outstanding amount redacted in the notice);

• The Hong Kong law-governed facility agreement dated July 8, 2019 for a dual-currency dual tranche term facility with CMB Wing Lung Bank Ltd. as agent (with the aggregate outstanding principal amount of the 2019 syndicated loan redacted);

• The Hong Kong law-governed facility agreement dated May 13, 2020 for term loan facilities with Industrial and Commercial Bank of China (Macau) Ltd. as agent (with the aggregate outstanding principal amount of the 2020 Macau syndicated loan redacted);

• The Hong Kong law-governed facility agreement dated June 30, 2020 for term loan facilities with Hongkong and Shanghai Banking Corp. Ltd. as agent (with the aggregate outstanding principal amount of the 2020 HK syndicated loan redacted);

• The Hong Kong law-governed facility agreement dated Aug. 9, 2021 with respect to term loan facilities with HSBC as agent with the aggregate outstanding principal amount of the 2021 syndicated loan A redacted); and

• The Hong Kong law-governed syndicated loan B (of which the facility agreement date and outstanding amount were redacted).

As previously announced, Haitong International Securities Co. Ltd is Powerlong’s financial adviser, and Sidley Austin is its legal adviser.

Requests for information on the holistic solution can be directed to Haitong (+852 2848 4333; project.powerlong@htisec.com).

The real estate company is based in Hong Kong.

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