Zhenro gives results of exchange offer for five notes due 2022

By Wendy Van Sickle

Columbus, Ohio, March 22 – China’s Zhenro Properties Group Ltd. announced the results of its exchange offer and consent solicitation for five series of senior notes that was announced on Feb. 21, according to an announcement.

The offers expired at 11 a.m. ET on March 18.

As of that time, the following notes had been tendered for exchange:

• $43 million, or 86%, of the $50 million outstanding 5.95% senior notes due March 2022 issued by ZhenAn Glory Investment Ltd. (ISIN: XS2308085112), which met the minimum acceptance amount of $42.5 million for this series;

• $196,639,000, or 90.04%, of the $218.39 million outstanding 5.98% senior notes due April 2022 (ISIN: XS2329241447), which met the minimum acceptance amount of $185,631,500 for the series;

• RMB 1,589,980,000, or 99.37%, of the RMB 1.6 billion outstanding 7 1/8% senior notes due June 2022 (ISIN: XS2358480155), which met the minimum acceptance amount of RMB 1.36 billion for the series;

• $270,223,000, or 92.23%, of the $293 million outstanding 8.7% senior notes due August 2022 (ISIN: XS2050860308), which met the minimum acceptance amount of $249.05 million for the series; and

• $218,761,000, or 92.58%, of the $236.3 million outstanding 6˝% senior notes due September 2022 (ISIN: XS2383329237), which met the minimum acceptance amount of $200,855,000 for the series.

All of the notes listed are issued by Zhenro except for the first series.

For all of the dollar notes, Zhenro was 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 exchanged their notes by the early consent deadline, or $5 in cash if they exchanged after the early deadline. Interest will also be paid in cash.

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

Therefore, the company will issue $728,62300 and RMB 1,589,980,000 of 8% senior notes due 2023 upon completion of the offer.

The new notes will be repaid at 102 at maturity and are redeemable at par plus interest prior to then.

The exchange offers were conditional upon the minimum acceptance amounts and related to the five notes due in 2022, asking noteholders to 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 hoped to strengthen its balance sheet and improve cash flow management.

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

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

Tendering noteholders were deemed to have given consent in the consent solicitation.

The principal purpose of the consent solicitation was 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, which is expected to occur on March 29.

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

Settlement is expected on March 29.

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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