Zhenro Properties starts exchange and solicitation for senior notes

Chicago, Feb. 22 – China’s Zhenro Properties Group Ltd. started an exchange offer and consent solicitation for five series of senior notes and then also a concurrent consent solicitation for eight separate senior notes, according to an announcement.

The exchange offers are conditional upon minimum acceptance amounts and relate to five notes due in 2022, asking noteholders to essentially move the maturity date to 2023 for all five of the notes in exchange for a higher coupon and a cash payment as consideration.

Against a backdrop of a volatile real estate sector, reduced bank lending to the real estate sector and decreased sales, Zhenro said that it may not have sufficient internal resources to address upcoming debt maturities in March 2022.

Through the transactions the company hopes to strengthen its balance sheet and improve cash flow management.

If the exchange offers and concurrent consent solicitation are not successful, the company may not be able to pay the first series of notes due in March. As a result, the company may consider an alternative debt restructuring exercise.

Exchange and consent

Zhenro is offering to exchange the following notes with the listed minimum acceptance amounts:

• $50 million outstanding 5.95% senior notes due March 2022 issued by ZhenAn Glory Investment Ltd. (ISIN: XS2308085112) with a minimum acceptance amount of $42.5 million;

• $218.39 million outstanding 5.98% senior notes due April 2022 (ISIN: XS2329241447) with a minimum acceptance amount of $185,631,500;

• RMB 1.6 billion outstanding 7 1/8% senior notes due June 2022 (ISIN: XS2358480155) with a minimum acceptance amount of RMB 1.36 billion;

• $293 million outstanding 8.7% senior notes due August 2022 (ISIN: XS2050860308) with a minimum acceptance amount of $249.05 million; and

• $236.3 million outstanding 6½% senior notes due September 2022 (ISIN: XS2383329237) with a minimum acceptance amount of $200,855,000.

For all of the dollar notes, Zhenro is offering an equal amount of new dollar-denominated senior notes due March 6, 2023 with an 8% coupon. Exchanging noteholders will also receive $10 in cash per $1,000 note if they exchange their notes by the early consent deadline, or $5 in cash if they exchange after the early deadline. Interest will also be paid in cash.

Similarly, for the renminbi-denominated notes, holders are being offered a like amount of 8% senior notes due March 6, 2023 plus RMB 100 cash (per RMB 10,000 note) for holders who submit their notes by the early deadline or RMB 50 after the early deadline, and accrued interest also in cash.

For clarity, all of the notes listed above are issued by Zhenro except for the first series.

The outstanding amount does not include $1.81 million held by two of the company’s directors and $20.5 million held by the company.

Tendering noteholders will be deemed to have given consent in the consent solicitation.

The principal purpose of the consent solicitation is to eliminate substantially all of the restrictive covenants and to modify certain of the events of default, the definition of change of control and other provisions in the existing notes indentures and to waive any potential breaches.

The proposed amendments and waivers will become operative after the cash consideration has been made and the exchange offer and consent solicitation have been consummated.

Concurrent solicitation

For the concurrent stand-alone consent solicitation, the company is seeking to waive any potential breaches and to amend the definition of change of control and the events of default provision in the consent notes indentures to carve out any default or event of default as a result of a default or event of default occurring under the existing notes, the perpetual securities, the October 2020 deed and the existing bank loans.

Accordingly, the company is soliciting consents for the following notes:

• $200 million outstanding 8.35% senior notes due 2024 (ISIN: XS2152219973);

• $300 million outstanding 9.15% senior notes due 2023 (ISIN: XS2076026983);

• $200 million outstanding 8.3% senior notes due 2023 (ISIN: XS2185842924);

• $290 million outstanding 7 7/8% senior notes due 2024 (ISIN: XS2099413093);

• $340 million outstanding 7.1% senior notes due 2024 (ISIN: XS2346158822);

• $349 million outstanding 7.35% senior notes due 2025 (ISIN: XS2226898216);

• $393 million outstanding 6.63% senior notes due 2026 (ISIN: XS2279711779); and

• $291 million outstanding 6.7% senior notes due 2026 (ISIN: XS2293750670).

Noteholders are being offered a $2.50 consent fee for each $1,000 note if they consent by the early deadline.

After the early deadline, noteholders will receive a consent fee of $1.00 per $1,000 note.

For the consent solicitations to be successful, a majority of noteholders from each series must consent.

Payment of the concurrent consent fee is expected to occur on March 28.

Details

The early consent deadline is 11 a.m. ET on March 4.

The exchange offer and consent solicitation expire at 11 a.m. ET on March 11.

Settlement is expected on March 28.

Listing of the new notes on the Stock Exchange of Hong Kong Ltd. would occur on March 29.

As a note, Zhenro started a consent solicitation for a series of perpetual securities on Feb. 18.

Admiralty Harbour Capital Ltd. is the solicitation agent and the dealer manager for the exchange offer (zhenro@ahfghk.com).

D.F. King & Co., Inc is the information, exchange and tabulation agent (+44 20 7920 9700, +852 3953 7208, zhenro@dfking.com, consent website: https://sites.dfkingltd.com/Zhenro2nd; exchange and consent website: https://sites.dfkingltd.com/Zhenro3rd).

Zhenro is a Shanghai-based real estate developer.

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