Oceanwide announces further lawsuit, another event of default under 12% notes

By Wendy Van Sickle

Columbus, Ohio, Oct. 28 – Oceanwide Holdings International Development III Co., Ltd. said Zhongshan Securities Co., Ltd. filed a lawsuit Wednesday with the Beijing Financial Court for a dispute with Oceanwide Holdings Co., Ltd. as guarantor of its 12% notes due 2021 (ISIN: XS1893891595) over a RMB 50 million note transaction, according to a company announcement.

Zhongshan Securities applied to the court for property preservation, and the court ruled to freeze the guarantor's bank deposits or to seize other assets, with a maximum amount of RMB 54,307,728.

The court served a notice of assistance in enforcement to Wuhan CBD Co., Ltd. and Minsheng Securities Co., Ltd., which are subsidiaries of the guarantor.

Under the notice, 89.23% of the equity interests in Wuhan CBD and 31.03% of the interests in Minsheng Securities that are held by the guarantor will be frozen for three years, ending Oct. 21, 2024.

Further, receivers were appointed over the entire issued shares and 27,510 preference shares of Oceanwide Holdings International Investment Co., Ltd. and 4,098,510,000 ordinary shares of China Tonghai International Financial Ltd., representing 66.13% of its total issued shares.

As a result, events of default occurred under the notes.

Previous events of default

As announced on Sept. 24, Bank of Beijing Co., Ltd. Shanghai Branch filed a lawsuit against the issuer and guarantor of the 12% notes and Minsheng Financing & Guaranty Co., Ltd. before the Shanghai Financial Court.

Bank of Beijing demanded, among other things, the accelerated repayment of a loan in the aggregate outstanding principal amount of $69.3 million, enforcement of the collateral under the loan and Minsheng Financing’s discharge of its guarantor obligations under the loan.

As announced on Sept. 3, an event of default was triggered by non-payment of the RMB 700 million 8˝% medium-term notes due Aug. 29, 2021 (extended to Aug. 30 because Aug. 29 was a public holiday) at their maturity. The total amount due under the MTNs was about RMB 700.5 million, inclusive of principal and interest.

The prior event of default was also triggered by litigation against the Beijing-based conglomerate and two related parties.

Several parties had filed lawsuits against China Minsheng Trust and Oceanwide before the Beijing Financial Court. Oceanwide’s controlling shareholder, China Oceanwide Holdings Group Co., Ltd., also has a controlling stake in China Minsheng Trust.

Langfang Shenghong Real Estate Development Co., Ltd. filed a lawsuit on Aug. 27 against China Minsheng Trust for failure to redeem when due certain trust units subscribed by Langfeng in an aggregate subscription amount of RMB 450 million under an assembled funds trust scheme.

In addition, Ruichang Longfu Enterprise Management Partnership filed a lawsuit on Aug. 27 against China Minsheng Trust for failure to redeem when due certain trust units in an aggregate subscription amount of RMB 60 million.

Yingda International Trust Co., Ltd. filed a lawsuit on Aug. 31 against Oceanwide and Wuhan CBD Co., Ltd. for Wuhan CBD’s failure to repay when due a total of RMB 889 million under a trust loan disbursed by Yingda and demanded Oceanwide discharge guarantee obligations as Wuhan CBD’s guarantor under that trust loan.

Background

In an announcement on Aug. 23, Oceanwide said it still had not made the April 30 interest payment on the 12% notes.

The non-payment had continued for a period of more than 30 consecutive days past the due date, and in June the company said it planned to settle the unpaid interest in full by Aug. 23.

However, as of Aug. 23 repayment had not yet been made. The guarantor said it expected to settle the unpaid interest and the outstanding principal amount of notes by Nov. 23.

On Thursday, Oceanwide said it is still in the process of disposing of some offshore assets to improve its liquidity, and that the disposal will not be able to generate cash inflow until its completion. The company said it is still striving to make the payment of unpaid interest and outstanding principal by Nov. 23.

Impact of events of default

Because of the events of default, the trustee of the notes or holders of at least 25% of the notes may, by written notice to the company, declare the principal and accrued interest on the notes to be immediately due and payable.

As of June 11, $210.2 million of the original $215 million principal amount remained outstanding.

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