Haimen Zhongnan makes progress on restructuring offshore debt

By Marisa Wong

Los Angeles, June 23 – Haimen Zhongnan Investment Development (International) Co., Ltd. issued a notice relating to its 11½% senior notes due 2024 guaranteed by Jiangsu Zhongnan Construction Group Co., Ltd.

The issuer announced significant progress with the restructuring of its offshore debt.

Following talks with holders of dollar-denominated senior notes, the issuer and the guarantor have entered into term sheets containing the principal terms of the restructuring with some holders of the existing notes representing about 37% of the aggregate outstanding principal amount of the notes as of June 23.

The restructuring is expected to be implemented mainly through a scheme of arrangement.

The company said the execution of the term sheet with the initial supporting creditors demonstrates substantial progress being made towards achieving the restructuring. The term sheet also provides that the issuer and the guarantor will work together with the initial supporting creditors to come up with a restructuring support agreement, which will supersede the term sheet.

Restructuring terms

Under the restructuring, the consideration for creditors of Haimen Zhongnan and Jiangsu Zhongnan under the indentures governing the existing notes is proposed to be the following:

• A cash redemption fund equal to 1% of the entitlement principal amount of that scheme creditor; and

• New notes – to be divided by a ratio of 3 to 7 into tranche 1 and tranche 2 – in an aggregate principal amount equal to the sum of (i) 99% of the entitlement principal amount of that scheme creditor (being 100% of its entitlement principal amount less the cash redemption allocated to that scheme creditor) and (ii) accrued and interest on the entitlement principal amount of that scheme creditor up to but excluding the restructuring effective date.

The new notes will comprise two tranches as follows:

• Tranche 1 in an aggregate original principal amount equal to 30% of the new notes issuance amount; and

• Tranche 2 in an aggregate original principal amount equal to 70% of the new notes issuance amount.

Tranche 1 and tranche 2 of the notes will mature three and four years, respectively, from the restructuring effective date.

The new notes will have mandatory redemption provisions requiring the company to redeem 5% of the aggregate original principal amount of notes on the date falling on 18 months, 24 months and 30 months from the original issue date and, in the case of tranche 1, on the date falling on 30 months, 36 months and 42 months from the new notes issuance amount and, in the case of tranche 2, as specified in the term sheet.

The new notes will benefit from a cash sweep relating to disposal of assets.

Interest on the outstanding principal amount of the new notes will be paid in kind for the first year after the original issue date and in cash for the remaining years. Interest is payable semiannually in arrears on the outstanding principal amount of the new notes at 6% per annum, if interest with respect to such interest payment period is to be paid in cash, or 7% per annum, if interest with respect to such interest payment is to be paid in kind.

Request for information on the proposed scheme can be directed to the financial advisor of the issuer and guarantor, Guotai Junan International (dcm.phoenix@gtjas.com.hk).

Trading of the notes on the Hong Kong stock exchange has been suspended since Nov. 7, 2022 and will remain suspended until further notice.

The Haimen Zhongnan property development and construction services company is located in the Jiangsu Province of China.

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