China's Shui On Land begins exchange offers for 9¾%, 7 5/8% notes

By Marisa Wong

Madison, Wis., April 14 - Shui On Land Ltd. said it has begun an exchange offer for its outstanding $875 million 9¾% senior notes and an exchange and tender offer for its outstanding RMB 3.5 billion dollar-settled 7 5/8% senior notes.

The offers will expire at noon ET on May 12.

The consideration for each $1,000 principal amount of 9¾% notes exchanged will be $1,000 principal amount of new notes due 2018 or $1,000 of new notes due 2020, an exchange premium of $45.00, accrued interest and an early participation payment, if applicable.

Holders who deliver instructions to exchange their 9¾% notes by noon ET on April 28 will receive an early participation payment of $7.50 per $1,000 of notes.

In other words, the theoretical exchange price for the 9¾% notes, excluding accrued interest, is 105.25 for notes exchanged before the early participation date and 104.5 for notes exchanged after the early participation date.

The consideration for each RMB 100,0000 principal amount of 7 5/8% notes exchanged will be $16,261.50 of new 2018 notes or $16,261.50 of new 2020 notes, plus an exchange premium of $284.60, plus any fractional cash payment, plus any accrued interest and plus an early participation payment, if applicable.

The consideration for each RMB 100,0000 principal amount of 7 5/8% notes tendered for purchase will be a cash amount of $16,546.10, plus an early participation payment, if applicable, and plus any accrued interest.

Holders who deliver instructions to exchange or sell their 7 5/8% notes by noon ET on April 28 will receive an early participation payment of $122.00 per RMB 100,000 of notes.

The considerations for the 7 5/8% notes, excluding accrued interest, result in theoretical exchange and tender prices of 102.5 for notes exchanged or tendered before the early participation date and 101.75 for notes exchanged or tendered after the early participation date. These theoretical prices are calculated based on a dollar per renminbi exchange rate of 6.1495.

Instructions to exchange or tender notes may be withdrawn prior to noon ET on April 28.

Settlement of the exchange offers is slated for May 19. Settlement of tendered 7 5/8% notes is expected to occur on May 20.

New notes

The interest rate and yield for the new 2018 notes will be at least 8½%, and the coupon and yield for the new 2020 notes will be at least 9¼%.

The new notes will be issued by wholly owned subsidiary Shui On Development (Holding) Ltd. and guaranteed by Shui On Land.

The issuer said it plans to conduct a separate concurrent offering of the new notes to institutional investors in Asia and Europe with Standard Chartered Bank and UBS AG, Hong Kong Branch as bookrunners.

The Regulation S notes will be sold at a price of at least par.

Pricing will occur after the early participation date of the exchange offers but no later than the expiration date of the exchange offers.

The proposed concurrent issue is subject to market conditions and investors' interest.

Additional tender terms

The tender offer for the 7 5/8% notes is conditioned on closing of at least one of the concurrent offerings, the additional 2018 notes or the additional 2020 notes.

In the event that the amount raised in the concurrent issue is less than the consideration payable for tendered 7 5/8% notes, the issuer will pro-rate the 7 5/8% notes tendered for purchase.

Other conditions

The issuer said it will not issue any new 2020 notes if the total amount of new 2020 notes - issued under the exchange and tender offers and the concurrent offering - is less than $200 million.

If no new 2020 notes are issued, holders who elected to receive 2020 notes under either exchange offer will receive 2018 notes instead. If the issuance condition for the 2018 notes (described below) is not satisfied either, holders will retain their old notes and will not receive any consideration under the exchange offers.

The issuer said it will not issue any new 2018 notes if the total amount of new 2018 notes - issued under the exchange and tender offers and the concurrent offering - is less than $200 million.

If no 2018 notes are issued, holders who elected to receive 2018 notes, or would have received 2018 notes instead of 2020 notes, will retain their old notes and will not receive any consideration under the exchange offers.

The company said the purpose of the exchange and tender offers and the concurrent issuance is to extend the maturity of a portion of its debt due in 2015.

Standard Chartered Bank and UBS are the dealer managers. D.F. King & Co., Inc. (+44 207 920 9700 or 212 269-5550, attn.: Damian Watkin/Katerina Papamichael, Sol@king-worldwide.com) is the information and exchange and tender agent.

Shui On Land is a Shanghai-based property development company and a member of Hong Kong-based Shui On Group.

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