Suning Appliance Group has launched a consent solicitation on its $600m 7.5% 2021s due in about two weeks to seek a maturity extension and to suspend certain events of defaults post its transfer of a part of its subsidiary to a government directed fund. The home appliance and consumer electronics giant has been going through a liquidity crisis since September 2020 after its former chairman waived the rights to ask China Evergrande Group to repay Suning’s strategic investment of RMB 20bn ($3.1bn). To tide over the liquidity crisis, the company announced the sale of its 16.96% stake in e-commerce subsidiary Suning.com to an industrial development fund led by the Jiangsu provincial government and the Nanjing city government called Jiangsu New Retail Innovation Fund II on July 12. This has triggered a change of control event, as Suning.com ceases to be a subsidiary of the company post the stake sale, which allows the debt holders to redeem the bonds at 101 together with the accrued interest.
Despite the sale, the Jiangsu-based company said that it is not in a position to repay its debt either upon maturity in September or if the bondholders choose to exercise their put option, which has forced it to call for the consent solicitation. The consent either needs the approval of holders representing at least 90% of the aggregate principal amount of the notes by the e-voting deadline of September 16 or the approval of at least 75% of the bondholders present at a September 20 meeting, representing not less than 66% in aggregate principal amount of the bonds. Bondholders who consent prior to a deadline of September 10 will receive a cash payment of $10 per $1,000 in principal amount of the bonds. Trading of the 7.5% 2021s issued by Granda Century and guaranteed by Suning Appliance Group was suspended starting Monday. According to CreditSights the stake sale of Suning.com to local government controlled industrial funds does not represent a bailout but is likely to improve Suning Appliance’s ability to repay debt. A government-backed strategic investment typically emerges in a debt restructuring process though it might not be timely enough to avoid bond defaults.