Sunac China to hold creditor meeting in September

Chicago, July 28 – Sunac China Holdings Ltd. provided an update regarding its offshore debt restructuring on Friday.

The court has directed a meeting be held at 11 p.m. ET on Sept. 17 for scheme creditors to consider an arrangement.

A hearing to sanction the scheme will be held at 9:30 p.m. ET on Oct. 4.

Prior announcement

As previously reported, on June 13, the company announced some amendments to its restructuring support agreement with creditors.

As previously outlined, in exchange for discharging and releasing existing debt, scheme creditors would be entitled to new notes, an issue of new convertible bonds, if elected a portion of an issue of a mandatory convertible bond and if elected the transfer of Sunac Services shares on the restructuring effective date.

The company controlling shareholder has agreed to equitize the $450 million shareholder loan on terms that are not more favorable than the mandatory convertible bond issue.

Mandatory convertibles

As a recap, the agreement allows for mandatory convertible bonds. Scheme creditors may voluntarily elect to exchange their existing debt claims into zero-coupon five-year mandatory convertible bonds, subject to an aggregate cap of $1.75 billion that may be increased by the company up to $2.2 billion, subject to greater increase under certain conditions. The mandatory convertible bonds will rank pari passu with the new notes.

The company worked with the majority ad hoc group, though, on some amendments to the terms of the mandatory convertible bond issue.

Now, holders may convert their mandatory convertible bonds into ordinary shares at a conversion price of HK$6 per share, reduced from HK$10 per share, on the restructuring effective date or six months after the restructuring effective date, subject to an aggregate cap of 25% of total mandatory convertible bonds. Any outstanding mandatory convertible bonds at maturity will be mandatorily converted into ordinary shares in full.

The terms of the amended agreement, though, now allow for the company to increase the percentage of amount of the issue, which may be converted in the upfront conversion, but may not decrease any conversion caps.

Further, the minimum conversion price will be reduced to HK$4 per share from HK$4.58 per share.

Commitment letter

On June 13, certain members of the ad hoc group executed a commitment letter on a non-binding basis that they will select not less than $800 million of the mandatory convertibles as part of their selection consideration under the scheme.

Shares

As previously reported, creditors may also elect to receive Sunac Services shares.

Scheme creditors may voluntarily elect to exchange their existing debt claims into existing Sunac Services shares at an exchange price equal to 2.5 times the volume-weighted average price of the shares for the 60 trading days immediately preceding the record time.

There is a minimum exchange price which has been modified to HK$13.5 per share from HK$17 per share.

The voluntary election is subject to an aggregate cap of 449,356,068 existing Sunac Services shares held by Sunac Services Investment.

Other elections

The terms of the other elections were unchanged after talks with the ad hoc group. They are as follows:

• Convertible bonds. Scheme creditors, in aggregate, will exchange $1 billion of their existing debt claims into $1 billion nine-year convertible bonds.

The convertible bonds will be convertible into ordinary shares of the company at a conversion price of HK$20 per share during the first 12 months after the restructuring effective date, after which the bonds will no longer have any conversion rights and will be redeemed at their maturity. Each scheme creditor will receive a pro rata share of the convertible bonds based on its holdings of the existing debt claims; and

• New notes. Scheme creditors will exchange their existing debt claims into up to eight series of new dollar-denominated senior notes in an aggregate principal amount that equals the total existing debt claims of the scheme creditors minus the aggregate principal amount of the convertible bonds, the aggregate principal amount of the mandatory convertible bonds (if any) and the amount of existing debt claims exchanged into existing Sunac Services shares (if any).

The new notes will mature between two and up to nine years from the earlier of restructuring effective date or Sept. 30 and benefit from the cash sweep from a comprehensive asset package. The company will have the option to extend the maturity of the first two tranches of new notes with original tenors of two and three years for one additional year. If maturity extension is elected, the interest rate of the extended tranches will increase by 100 basis points during the extension period.

Those notes will bear cash interest at rates ranging from 5% to 6½% per annum. The company may elect to make all or part of the interest payment in kind in the first two years at interest rates that are 100 bps higher than the cash interest rates per annum.

Sunac is a Tianjin, China-based residential and commercial property developer.

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