Tuspark Forward gives consent results received by early deadline

Chicago, Aug. 5 – China’s Tuspark Forward Ltd. announced the early results of its consent solicitation for two series of its notes guaranteed by parent company Tus-Holdings Co., Ltd. in a notice on Thursday.

As previously announced, Tuspark is seeking consents to amendments and waivers to its $400 million 7.95% guaranteed bonds due 2021 (ISIN: XS1863988157) that were issued on two dates, Aug. 15, 2018 and Oct. 15, 2019, and its $550 million outstanding of 6.95% guaranteed bonds due 2022 issued on June 18, 2019 (ISIN: XS2011786659).

As of the early deadline at 11 a.m. ET on Aug. 4, the information and tabulation agent received, for each series of bonds, consent instructions in favor of both of the proposed extraordinary resolutions from holders representing more than 80% of the outstanding principal amount.

Extraordinary resolution 1

The group is seeking 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. will be appointed as the new trustee and principal paying agent.

The group also wants bondholders to waive any default, event of default or 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 will come from Tuspark Innovation Venture Ltd. and Tuspark Technology Innovation Ltd.

Also, the issuer is seeking 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 around 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 will 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% shall remain outstanding 24 months after the effective date.

Overdue interest will be paid before Aug. 31.

The relevant new share owners will 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 will be replaced with new language for a cross-acceleration provision.

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

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 other terms.

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

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

Details

An early consent fee will be paid to noteholders who delivered 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 the final deadline at 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 voted in favor of both extraordinary resolutions.

Bondholder meetings to pass the relevant extraordinary resolutions are to 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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