Shimao Group has announced a restructuring proposal for $11.7bn of its offshore debt, according to a press release by the company. As per the release, the company has presented 4 restructuring options to its bondholders and is seeking their approval for a restructuring plan in order to avoid liquidation. The options presented are as follows:
- Option 1: Short Term Instrument – The company will replace the principal by short term notes and loans having a 6Y tenure. The aggregate principal offered will not exceed $3bn. The company will pay interest on 50% of the outstanding principal of the short term notes issued at 5% or 6% for the first 4 years after the restructuring date and equal to 5% starting from the 5th year. They will also be mandatorily redeemed at a redemption price equal to 50% of the principal amount of the short term notes with any accrued and unpaid interest aggregating to cumulative principal redemption of 33%, 66% and 100% by the end of 4th, 5th and 6th year respectively.
- Option 2: Long term Instrument – The company will replace the principal by long term notes or a loan having a 9Y tenure. The aggregate principal offered will not exceed $4bn. The company will pay interest on the long term notes issued, at 3% for the first 6 years after the restructuring date and equal to 2% starting from the 7th year. The company will issue a 7Y Series A Note, 8Y Series B Note and a 9Y Series C Note with a principal amount equal to 25%, 37.5% and 37.5% of the original issue amounts respectively. For the long term loan, on a cumulative basis, the company will repay the 25%, 62.5% and 100% of loan principal by the end of 7th, 8th and 9th year respectively.
- Option 3: Mandatory Convertible Notes – The company will issue zero coupon mandatorily convertible bonds, that are convertible into new shares of the company. The notes have a voluntary conversion option into new shares at a conversion price of $8.5. 100% of the notes will be mandatorily converted into new shares of the company at $8.5 with 25% of the notes being converted at the end of each quarter, post the end of the voluntary conversion period.
- Option 4: Combination of Different Securities – Company will provide a fixed combination of different securities in an aggregate principal equal to 100% of outstanding principal amount with 25% in short term notes, 35% in long term notes and 40% in mandatory convertible notes.
In related news to Chinese Developers, Agile Group was downgraded by a notch to Caa2 from Caa1 by Moody’s. Moody’s also downgraded Agile’s senior unsecured notes to Caa3 and its perpetual notes to Ca. The downgrade reflects heightened default risk given its material debt maturities over the next 1 year and weak liquidity due to lower sales and restricted access to funding. Agile Group has a total of RMB 9bn ($1.25bn) of upcoming maturity by March 2025, including HK$ 2.4bn ($300mn) of exchangeable offshore bond and $500mn of 5.75% maturing in January 2025.
Bonds of Shimao and long term bonds of Agile continue to trade at deeply distressed levels of 3-5 cents on the dollar, while Agile’s short term bonds trade at distressed levels of 14-17 cents on the dollar.