KWG exchange offer for three notes, consent bid for seven successful

By Marisa Wong

Los Angeles, Sept. 13 – China’s KWG Group Holdings Ltd. announced the results of its exchange offer for three series of notes and consent solicitation relating to one of those three series as well as the separate consent solicitation for six other series of notes, according to a company announcement.

As announced on Sept. 2, KWG offered to exchange

• At least $810 million, or 90%, of the aggregate outstanding principal amount of its $650 million 6% senior notes due September 2022 (ISIN: XS1556169206) and $250 million 5.2% senior notes due September 2022 (ISIN: XS1685542141); and

• At least $560 million, or 80%, of the outstanding principal amount of its $700 million 7 7/8% senior notes due September 2023 (ISIN: XS1954740285).

The company offered to exchange the existing notes (“exchange notes”) for new 6% senior notes due January 2024 and 7 7/8% senior notes due August 2024. The two September 2022 notes will be exchanged for January 2024 notes, and the September 2023 notes will be exchanged for August 2024 notes.

KWG also solicited consents from holders to some proposed waivers and proposed amendments to the indenture governing the September 2023 notes.

The purpose of the exchange offer and consent solicitation for the 2022 and 2023 notes is to improve the company’s overall financial condition, extend its debt maturity profile, strengthen its balance sheet and improve cash flow management.

Exchange offer results

As of 11 a.m. ET on Sept. 9, the expiration time, holders had tendered and KWG accepted for exchange $836,764,000, or 92.97%, of the outstanding September 2022 notes and $636,469,000, or 90.92%, of the September 2023 notes.

The company will issue $794,925,800 of new January 2024 notes and $636,469,000 of new August 2024 notes in exchange for the tendered notes.

The exchange consideration for each $1,000 principal amount of September 2022 notes (both series) consists of $950 principal amount of January 2024 notes, $50 upfront principal repayment in cash and $5 in cash as an incentive fee. No accrued interest will be paid on either series of September 2022 notes.

The exchange consideration for each $1,000 of September 2023 notes is $1,000 principal amount of August 2024 notes and $5 in cash. Accrued interest will also be included in the exchange consideration for the September 2023 notes.

Holders could not tender their September 2023 notes without delivering consents and vice versa. As a result, the required consents for the September 2023 notes have been obtained.

The company plans to execute a supplemental indenture for the September 2023 notes.

The exchange offer and consent solicitation are subject to some conditions, including the minimum acceptance amount being tendered. Based on the tender results, the minimum threshold has been met.

Settlement of the new January 2024 notes is expected to occur on Sept. 14. Listing of the new January 2024 notes on the Singapore Exchange will be on Sept. 15.

Settlement of the new August 2024 notes will occur on or around Sept. 30. Listing of the new August 2024 notes on the Singapore Exchange will be on Oct. 3.

Successful consent bid

Under the concurrent consent solicitation, the company obtained the consents necessary to effect the proposed waiver and proposed amendment with respect to each and every one of the following series (“consent notes”):

• $458 million 7.4% senior notes due March 2024 (ISIN: XS2034561584);

• $625 million 5 7/8% senior notes due November 2024 (ISIN: XS1716631301);

• $300 million 5.95% senior notes due August 2025 (ISIN: XS2214229887);

• $400 million 6.3% senior notes due February 2026 (ISIN: XS2257830716);

• $378 million 6% senior notes due August 2026 (ISIN: XS2343325622); and

• $300 million 7.4% senior notes due January 2027 (ISIN: XS2100654586).

The company intends to execute supplemental indentures effecting the proposed amendments as soon as practicable.

The main purpose of the concurrent consent solicitation was to waive events of default and any consequential breaches or defaults arising from the non-payment of interest on the March 2024 notes on Sept. 5 and to amend the events of default provision in the consent notes indenture to carve out any default or event of default in respect of the consent notes as a result of a default or event of default occurring under the exchange notes and to make other related changes and some other updates.

Approval of the proposed waiver and amendment with respect to the consent notes required consents from holders of a majority in the aggregate principal amount of the outstanding consent notes.

The company noted before that if it fails to obtain the required consents to effect the proposed waiver and amendment, the increase of cross-default risk as a result of any default of the exchange offer notes may adversely affect its flexibility in pursuing new business opportunities and new sources of capital, which may have a material and adverse effect on its business and financial condition, which in turn may have a material and adverse impact on its ability to service the consent notes and seek refinancing.

Consents were due by 11 a.m. ET on Sept. 9. Consents could not be revoked.

Holders of record as of Sept. 1 were eligible to participate.

KWG offered a consent fee of $2.50 per $1,000 principal amount.

Payment will be made as soon as practicable after the consent expiration deadline and the conditions to the consent solicitation are met. Settlement is expected to occur on Sept. 14.

Morrow Sodali Ltd. (+44 20 4513 6933, +852 2319 4130; KWG@investor.morrowsodali.com; https://projects.morrowsodali.com/kwgexchange; https://projects.morrowsodali.com/kwgconsent) is the information, exchange and tabulation agent.

KWG Property is a developer based in Guangzhou, China.

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