Tuspark Forward seeks consents, waivers for two series of bonds

Chicago, July 22 – China’s Tus-Holdings Co., Ltd. and subsidiary Tuspark Forward Ltd. launched a consent solicitation for two series of bonds on Thursday, according to a notice.

The consent solicitation for certain amendments and waivers pertains to the $400 million 7.95% guaranteed bonds due 2021 that were issued on two dates, on Aug. 15, 2018 and Oct. 15, 2019 (ISIN: XS1863988157) and the $550 million outstanding of 6.95% guaranteed bonds due 2022 issued on June 18, 2019 (ISIN: XS2011786659).

Background

Tuspark has not paid the interest payment due on June 18 for the 2022 bonds.

An event of default, therefore, has occurred on the 2022 bonds and a cross-default has occurred on the 2021 bonds.

Due to many factors, the issuer and parent guarantor are facing a short-term liquidity issue, with significant upcoming debt maturities and limited immediate financing options.

The group is exploring ways to fund their payment obligations, including asset disposals and other means.

The group wishes to obtain bondholders’ consent to extend the maturity of the bonds and amend certain other terms.

The issuer and parent guarantor are committed to repaying the bonds in full.

There are two extraordinary resolutions and they are conditioned upon the passing and implementation of the other.

Extraordinary resolution 1

The group seeks the voluntary retirement of Bank of Communications Trustee Ltd. as trustee on the effective date and similarly Bank of Communications Co., Ltd. Hong Kong Branch as the principal paying agent, registrar and transfer agent.

China Construction Bank (Asia) Corp. Ltd. would be appointed as the new trustee and principal paying agent.

The group also wants bondholders to waive any default, event of default of potential default that may occur in connection with the first extraordinary resolution.

Extraordinary resolution 2

Under the second extraordinary resolution, among several parts of the resolution, new guarantees would come from Tuspark Innovation Venture Ltd. and Tuspark Technology Innovation Ltd.

Also, the issuer seeks bondholder’s approval for security by way of assignment in favor of China Construction Bank over the intercompany loan receivables under an intercompany loan provided by the issuer to Tuspark Science with current outstanding principal amount of around $124.78 million and future interest of around $27.45 million which will accrue from the effective date to May 13, 2024 and security over the specified account.

Tuspark is also asking to extend the maturity date to approximately May 13, 2024, or 33 months after the effective date.

The company plans to repay 5% of the 2021 bonds’ effective date principal amount or the 2022 bonds’ effective date principal amount by Aug. 31.

An amortization schedule would also be put in place that 12 months after the effective date not more than 65% of the principal amount for both series would be outstanding, based on the amount outstanding on the effective date. And, secondarily, that not more than 35% should remain outstanding 24 months after the effective date.

Overdue interest would be paid before Aug. 31.

The relevant new share owners would have the following new covenants: there would be no disposal of any relevant shares unless not less than 80% of the net proceeds are paid to the trustee under each series of bonds on a pro rata basis and not more than 20% of the net proceeds would be used for repurchase of the bonds.

An event of default will arise if there is a failure to pay principal or interest after such failure continues for a period of 15 days.

The cross-default condition would be replaced with new language for a cross-acceleration provision.

The issuer would have the option to redeem the bonds at any time at par plus interest.

Details

An early consent fee will be paid to noteholders who deliver a consent instruction before 11 a.m. ET on Aug. 4. The consent fee will be paid in two parts, half on Aug. 20 and half on Oct. 31.

A base consent fee will be paid to noteholders who consent before 11 a.m. ET on Aug. 11 in the amount of $5 per $1,000 note, payable on or before Aug. 20.

Consent fees will only be paid to bondholders who vote in favor of both extraordinary resolutions.

Bondholder meetings to pass the relevant extraordinary resolutions will be held at 9:30 p.m. ET on Aug. 12 for the 2021 bonds and at 10 p.m. ET on Aug. 12 for the 2022 bonds.

The meetings will either be held at Linklaters in Hong Kong or by video conference call or other electronic means.

A quorum is needed, and a vote in favor from the majority of those present is necessary, to pass the extraordinary resolutions.

The effective date is planned for Aug. 13.

Haitong International is the solicitation agent (+852 2848 4333, tuspark.lm@htisec.com).

Morrow Sodali Ltd. is the information and tabulation agent (+852 2319 4130, +44 20 4513 6933, tusholdings@investor.morrowsodali.com).

Beijing-based Tus-Holdings is the former Tsinghua University Science Park (TusPark) Development Center.

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