Skyfame 4% convertibles holders agree to settlement at less than par

By Angela McDaniels

Tacoma, Wash., June 9 - Skyfame Realty (Holdings) Ltd. and the holders of its $192 million outstanding principal amount of 4% secured convertible notes due 2013 have reached an agreement to settle the notes early and at less than par, according to a company news release.

Skyfame unit Yue Tian Development Ltd. agreed to pay $100,000 by Aug. 3 and $53.6 million by Oct. 4. These payments represent 80% of the outstanding principal amount of the notes.

If Yue Tian fails to make the first payment on time, it will have a further two months to pay and will incur a penalty of approximately $27,000 a day during the first month and about $111,000 a day in the second month.

If the first payment and the penalty interest have not been received by Oct. 4, the noteholders can terminate the agreement. If they do not terminate the agreement, a penalty of roughly $111,000 a day will be charged until the first payment and all penalty interest are paid in full.

If Yue Tian fails to make the second payment by Oct. 4, it will have a three more months to pay. It will incur a penalty of approximately $60,000 a day during the first month and about $102,000 a day in the second and third months. This extension is subject to the receipt of the first payment and any penalty interest by Oct. 4.

If the second payment and penalty interest have not been received by Jan. 4, 2011, the noteholders can terminate the agreement.

The participating noteholders granted the company a standstill period that will end Oct. 4 or, if the deadline of the second payment is extended, Jan. 4, 2011.

Yue Tian and Skyfame chairman Yu Pan agreed to transfer RMB 856.39 million of escrow funds to an offshore account maintained with note trustee Hongkong and Shanghai Banking Corp. Ltd. by June 17. The parties agreed that if the noteholders agreement is terminated, they will negotiate a settlement for the distribution of the funds held in the account.

As part of the noteholders' agreement, the winding-up petition against the company will be dismissed and the receivers and provisional liquidators appointed for the company will be discharged. Skyfame said this will restore the group to normal conditions and enable it to continue its property development business.

Under the agreement, the interests and obligations of all parties will be restored to the same position as they were in prior to the delivery of the acceleration notice and the enforcement of the security by the trustee. This will be done by the later of June 28 and five business days after the dismissal of the winding-up proceeding.

Skyfame Realty is Hong Kong-based investment holding company focused on property development.

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