China Fortune Land says holders of 83.64% of bonds accede to RSA

By Marisa Wong

Los Angeles, Dec. 2 – China Fortune Land Development Co., Ltd. and CFLD (Cayman) Investment Ltd. issued an update on Friday relating to its restructuring support agreement.

China Fortune Land announced that holders of about 83.64% of the aggregate outstanding principal amount of its existing bonds have acceded to the RSA as of Dec. 2.

Among those holders, holders of an aggregate principal amount of about $1,315,000,000 of the existing bonds have selected new bond 2 as part of their restructuring consideration on an indicative basis.

The cash prepayment fee deadline expired as of 4 a.m. ET on Dec. 1. However, the RSA will remain open for accession by bondholders until 5 a.m. ET on Jan. 6.

The company also reminded holders that it has initiated the English scheme with the English Court, and the convening hearing has been scheduled on Dec. 7.

Previous update

Earlier in the week, the company proposed some amendments to the RSA. The company proposed an increase of the cash prepayment fee and a loosening up of the qualification criteria for the cash prepayment fee, as previously reported.

The company is increasing the upfront cash prepayment fee to 2.8% from 1% to eligible creditors, funded with sales of a disposal asset portfolio.

Any cash payment will result in a corresponding reduction in the principal amount of new bond 1 that the scheme creditor is entitled to receive.

Additionally, bondholders no longer have to retain all eligible restricted bonds from the cash prepayment fee deadline until the record time to qualify for the fee payment.

Likewise, the condition that consenting creditors must not transfer their eligible restricted bonds after the fee deadline in order to qualify for the cash prepayment fee has been removed.

RSA

Existing noteholders will be distributed a certain amount from a new bond 1 (46.7% of the existing bonds principal) and then can opt for various distributions from two other new bonds (for the other 53.3%).

The principal on the existing bonds will translate into the three new bonds with the unpaid interest paid out as zero-coupon bonds, interest accrued on the existing bonds from the time when they are held by the scheme creditor from the last coupon payments dates to the restructuring effective date.

Each of the three new bonds has an eight-year tenor and can be called at any time at par. Interest is 2½%.

There is a mandatory debt-to-trust unit swap on bond 1.

The difference between bond 2 and bond 3 is that bond 2 has a mandatory debt-to-equity swap.

The company previously said that holders of more than 50% of the aggregate outstanding principal amount of its existing bonds have acceded to the RSA.

Among those acceding holders, holders holding an aggregate principal amount of more than $1 billion of the existing bonds have selected new bond 2 as part of their restructuring consideration on an indicative basis, the company reported.

The company said it has decided to ensure fair treatment of all holders of the existing bonds and pursue a holistic restructuring of the bonds by implementing the proposed restructuring via an English scheme. Once sanctioned by the English Court and effective, the scheme would bind all holders of the existing bonds.

Prior details

Over the past several months, the company and its advisers have engaged in in-depth discussions of the terms of the restructuring of its existing bonds with holders of those bonds.

As of Sept. 16, China Fortune’s existing bonds include the following:

• $530 million 8 5/8% guaranteed bonds due February 2021 (ISIN: XS1953977326);

• $200 million 9% guaranteed bonds due June 2021 (ISIN: XS1835626810);

• $940 million 9% guaranteed bonds due July 2021 (ISIN: XS1860402954);

• $60 million 9% guaranteed bonds due December 2021 (ISIN: XS1924881334);

• $340 million 10 7/8% guaranteed bonds due December 2021 (ISIN: XS2275514458);

• $350 million 7 1/8% guaranteed bonds due April 2022 (ISIN: XS1972090119);

• $300 million 6.92% guaranteed bonds due June 2022 (ISIN: XS2189577906);

• $330 million 8¾% guaranteed bonds due September 2022 (ISIN: XS2232030788);

• $500 million 6.9% guaranteed bonds due January 2023 (ISIN: XS2100597256);

• $650 million 8.6% guaranteed bonds due April 2024 (ISIN: XS1972092248); and

• $760 million 8.05% senior notes due January 2025 (ISIN: XS2100597330).

The proposed restructuring, when completed, will provide the group with a stable capital structure offshore, enabling the group to better manage its operations and deliver long-term value for all of its stakeholders, the company previously said.

The proposed restructuring is expected to be implemented through a scheme of arrangement. Originally, the issuer was also pursuing the possibility of an exchange offer and/or consent solicitation.

A copy of the RSA is available for download at https://sites.dfkingltd.com/cfld.

D.F. King Ltd. (+44 20 8089 3951, +852 5803 0899; https://sites.dfkingltd.com/cfld; cfld@dfkingltd.com) is the information agent.

Admiralty Harbour Capital Ltd. (cfld@ahfghk.com) is restructuring financial adviser to the issuer.

Sidley Austin will act as restructuring legal adviser.

Background

As of June 30, China Fortune’s total debt amounted to RMB 187.6 billion, including bank borrowings of RMB 45.2 billion, bonds and debt financing instruments of RMB 77.4 billion and trust, asset management and other financings of RMB 65 billion.

To improve its financial stability and sustainability, the group launched a debt restructuring plan on Sept. 30, 2021 under the guidance of a special committee composed of state and local government agencies, among others.

As of Sept. 16, holders of about RMB 120.3 billion of the group’s onshore debts had signed the onshore restructuring agreement, waiving accrued interests and associated penalty interests thereon by roughly RMB 10.8 billion.

The group is launching the current proposed restructuring for the holders of the existing offshore bonds, guided by the principle of treating pari passu debts equally.

The company said previously that although it still faces various challenges from the macroeconomy, the industry, the credit environment, the Covid-19 pandemic and the tightened liquidity, it has maintained ongoing operations and been actively seeking to resume work and production and to put its business back on track as soon as possible.

At the same time, the group is keen to push forward asset disposals and onshore property trust establishment according to the terms of the proposed restructuring.

China Fortune is a real estate developer based in Beijing.

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