Zhaohai Investment seeks to waive non-compliance for 3.1%, 4% bonds

New York, May 26 – Zhaohai Investment (BVI) Ltd. began a consent solicitation for its $300 million of 3.1% guaranteed bonds due 2018 and its $500 million of 4% guaranteed bonds due 2020 in order to address non-compliance with the terms of the bonds.

The company said that the recent depreciation of the renminbi against the dollar has caused bond guarantor Bianhai Jiantou (Hong Kong) Development Ltd. to suffer foreign exchange losses, resulting in non-compliance with covenants requiring Zhaohai and the guarantor to have a consolidated net worth of at least $1 and requiring the guarantor to have total owners’ equity of at least HK$10 million.

In addition, Tianjin Binhai New Area Construction & Investment Group Co., Ltd., which provides a deed of equity interest purchase undertaking for the bonds, has not yet delivered its financial statements for the year ended Dec. 31, 2016. Audited financial reports are required by the bonds to be delivered within 120 days.

Zhaohai said the financial statements are expected to be delivered before the consent solicitation expires.

In order to remedy the non-compliance with the bond covenants, the consent solicitation has two paths.

If Tianjin Binhai delivers a certificate to the bond trustee before the settlement date of the solicitation confirming registration with China’s State Administration of Foreign Exchange by 11 p.m. ET on July 4 then the amendments to the terms of the bonds will allow Tianjin Binhai to assume the guarantee of the bonds from Bianhai Jiantou, the keepwell and liquidity support deed and the deed of equity interest purchase undertaking will be terminated, the net worth covenant will be deleted and any defaults and potential defaults will be waived.

If the certificate is not received, the amendments will waive any defaults and potential defaults and suspend some covenants in the bond terms and the keepwell and liquidity support deed until Dec. 31.

The early voting deadline in the solicitation is 4 a.m. ET on June 20 and the solicitation ends at 4 a.m. ET on June 28.

Meetings for holders of the 3.1% bonds will be held at 4 a.m. ET on June 30 and for holders of the 4% bonds at 4:30 a.m. ET on June 30.

Settlement is planned for July 5.

Both series of bonds need to approve the changes for the amendments to take effect.

The consent fee is 0.35% of the principal amount for early consents and 0.15% of the principal amount for those delivered after the early deadline.

The tabulation agent is D.F. King Ltd. (+44 20 7776 7574 or debtteam@dfkingltd.com).

Tianjin Binhai is a Tianjin, China-based provider of engineering and construction services.

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