Corporate Debt Restructuring Masterclass

18 July 2022 (Mon), 5pm Singapore/HK time

Fitch has downgraded Turkey’s cruise and commercial port provider Global Liman Isletmeleri’s (GLI) $250mn notes due in November 2021 by a massive five notches to CC from B. The rating leaves the notes deep inside junk territory and just two notches short of Restricted Default (RD). The notes had also previously received a one notch downgrade to B from B+ in April 2020. Due to the pandemic, passenger traffic at the group’s ports declined by 89% in the first 3 quarters of 2020 with passenger activity to only resume slowly in 2Q21 with a full recovery not before 2024. Parent Global Ports Holding’s (GPH) had cash balances of about $100mn as of end November 2020 and is expected to receive $95mn-$97mn plus $11mn in a deferred consideration through the sale of Port Akdeniz against payments to the tune of ~$313mn in 2021 (excluding the debt of Port of Akdeniz and including revolving facilities). The rating action reflects GPH’s worsened credit profile and a possible refinancing for the notes. The rating report reveals that the company is considering an exchange of the existing notes with new notes under Part 26 of the UK scheme of arrangements to bridge the gap. The scheme provides an override to contractual consent thresholds, allowing 50% of the noteholders constituting 75% in value of creditors to pass the vote. Under GLI’s financing proposals, the maturity of the notes will be extended to May 2024, interest reduced to 6.5% and a payment-in-kind (PIK) provision applied until May 2022 while the structural features, security in the form of a share pledge and cash sweep would be strengthened. The notes could be viewed at (C/RD) DDE level by the rating agency in case the company does not have sufficient time to explore refinancing options after exhausting all its funding options. Moody’s had downgraded Global Liman to Caa1, with a negative outlook in September 2020. The 8.25% 2021s notes were trading down 0.25 at 84 cents on the dollar.

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