China South City (CSC) launched a consent solicitation to extend the maturities and adjust coupons on 5 of its dollar bonds. The bonds in question are its 11.5% 2022s, 10.875% 2022s, 7.25% 2022s, 11.95% 2023s and 10.75% 2023s. CSC is asking bondholders to:

  • Extend maturities of the above bonds
  • Allow principal payment in instalments
  • Allow optional redemption of any of the 7.25% 2022s, 11.95% 2023s and 10.75% 2023s
  • Align the coupons on the 5 bonds
  • Give the trustee and bondholders the ability to trigger an event of default if the keepwell provider (Term of the Day, explained below) fails to comply with the deed terms

However, details regarding how long the bonds will be extended for and the quantum of coupon adjustment were not revealed. For context, in January, the company received approval from holders of its 11.5% 2022s and 10.875% 2022s to extend the maturities by six months. In June, it obtained the permission from investors of all the above five bonds to amend terms to include a change of control and definition of permitted bondholders. With its dollar bonds falling over 20%, analysts have noted that the need to extend the maturities comes despite CSC receiving state support after selling its its property management unit to Shenzhen SEZ Construction and Development Group (SZCDG). CSC said, “Negative reaction to these onshore events by offshore capital markets has curtailed our funding sources to address upcoming maturities”, adding that if the consent solicitation fails, it may not be able to pay the bonds’ coupons and principal in full.

China South City’s USD 7.25% bonds due November 2022 were down over 10.6 points to 40.51 cents on the dollar. 

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