Huachen Energy gets U.S. court recognition of proceedings in Beijing

By Sarah Lizee

Olympia, Wash., Feb. 2 – Huachen Energy Co., Ltd. gained recognition from the U.S. Bankruptcy Court for the Southern District of New York of its proceedings in the Intermediate People’s Court of Beijing, according to an order filed Wednesday.

Ernst & Young Hua Ming LLP is the company’s foreign representative, as previously reported.

Minhai Liang, a representative of Ernst & Young Hua Ming, said in a declaration that from around July 2018, the company started to encounter a “challenging funding environment and liquidity pressure,” which coincided with the tightening of China’s financing policies and debt defaults by its parent company, Wintime Energy Co., Ltd.

On Nov. 18, 2019, Huachen defaulted on the interest payments then due on its 6 5/8% senior secured notes due May 18, 2020. On Jan. 20, 2020, some noteholders declared the outstanding principal amount on the notes to be immediately due and payable.

In response, the company decided to pursue a restructuring of the notes. Since then, the company has been in discussions with an informal group of noteholders advised by Kirkland & Ellis and Houlihan Lokey over the terms of the restructuring.

As of Sept. 10, the noteholder group consisted of eight holders representing 54.7% of the principal amount of the outstanding notes.

At around the same time, Wintime Energy underwent its own bankruptcy reorganization proceeding. In December 2020, the Intermediate People’s Court of Jinzhong Municipality, Shanxi Province, ruled that Wintime Energy had completed its reorganization plan. However, Wintime Energy’s reorganization plan did not cover Huachen or its assets, nor did it seek to resolve or compromise Huachen’s debt.

Plan terms

Under Huachen’s plan, the maturity of the notes will be extended through 2026, and interest will be reduced to 4.65% and a portion of it will be paid in kind.

Additional security interests will be granted to secure the company’s obligations in respect of the notes, including a specified portion of the 26.67% partnership interest held by the debtor in Shanghai Runliangtai Internet of Things Technology Partnership, and a specified portion of the 10% equity interest held by Huayuan New Energy Co., Ltd. in Definite Arise Ltd.

Huachen said the plan applies to both its onshore creditors, which comprise holders of the company’s renminbi bonds and other ordinary claims, and the noteholders. In particular, both groups are set to receive substantially the same economic outcomes under the plan. The way the plan will be implemented, however, will differ between the groups.

While onshore creditors will receive repayments of their claims and interest payments directly under the plan, the noteholders will receive repayments and interest payments under an amended and restated indenture and the restructured notes.

The company said the reason for this is that it is critically important to the noteholders that the restructured notes continue to be tradable instruments, whereas ongoing tradability of debt is not a major concern for onshore creditors, including renminbi bondholders.

“The plan is the means by which the financial restructuring is to be implemented and will significantly reduce debt service costs, increase liquidity and facilitate the operation of the debtor’s business in a stable manner going forward,” Liang said in the declaration.

In December, each class of voting creditors present at a meeting voted to approve the plan. After receiving the needed votes in favor of the plan, the Chinese court approved the plan.

The Beijing-based electricity company filed Chapter 15 bankruptcy on Jan. 4 under case number 22-10005.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.