China’s Zhongliang maps out proposed scheme of arrangement

Chicago, June 1 – Zhongliang Holdings Group Co. Ltd. entered into a term sheet with members of an ad hoc committee of holders of its existing notes representing 19% of the outstanding principal amount, according to a notice.

The proposed scheme will seek to compromise the existing notes and may, with the written consent of the ad hoc committee, include other debts of the company.

The company will move on to a restructuring support agreement at some point that will supersede the term sheet.

The restructuring effective date is anticipated for Jan. 1, 2024, but definitely no earlier than Nov. 1, 2023.

The scheme creditors represent the $18,653,000 outstanding 8½% senior notes due May 2022, the $12,574,000 outstanding 9½% senior notes due July 2022, the $200 million outstanding 12% senior notes due April 2023, the $224,224,517 outstanding 8¾% senior notes due April 2023 and the 4473,848,483 outstanding 9¾% senior notes due December 2023.

Key terms

According to the term sheet, there will be an upfront cash payment of 1% of the outstanding principal amount of the scheme debts to the scheme creditors.

Scheme creditors will receive the other 99% of the outstanding principal amount in a combination of new senior notes and new convertible bonds.

An additional principal amount equivalent to 6% of the new senior notes will also be issued.

The new senior notes will have a 5% interest rate and a 3.5-year term. Interest will only start to accrue after the first year, though.

The convertible bond will be capped at a maximum amount of $140 million, convertible into ordinary shares of the company.

The 3% convertibles will also have a 3.5-year tenor. Interest may be paid in kind.

During the conversion period, convertibles may be converted at an initial conversion price of 1.3 times the volume-weighted average price of the shares for 30 trading days immediately preceding the restructuring effective date, with a floor of HK$1.2 per share and a cap of HK$2.00 per share.

In addition to an upfront cash payment of 1%, a restructuring support agreement fee will be paid on or before the restructuring date equal to 0.25% of the principal amount of the eligible restricted debts held by each consenting creditor.

Information

Requests for more information can be had from Guotai Junan International as financial adviser to the company (dcm.zhonglianglm@gtjas.com.hk) or Alvarez & Marsal Corporate Finance Ltd. as financial adviser to the ad hoc group (ProjectNexus@alvarezandmarsal.com).

Zhongliang is a residential property management company based in Shanghai.

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