In a letter delivered on Aug. 10, by hand to Logan Group Chairman Kei Ho Pang and via email to the company’s advisor’s Sidley Austin, Ropes & Gray, the legal advisors to an ad hoc group, or AHG, and holders supportive of the AHG, which collectively hold well in excess of 25% of the total outstanding amount of notes issued by the company, responded directly to the Chinese property developer’s Sunday, Aug. 7, announcement to the Hong Kong stock exchange, according to two sources with direct knowledge.
The letter refers to the
Aug. 7 announcement, as well as to numerous communications between the company’s financial advisor, Haitong International Securities Company Ltd., and each of the members of the AHG, each such communication being initiated by Haitong, the sources said.
The Aug. 7 announcement expresses the company’s intention to pursue “a holistic management of the Company’s offshore debts” and “to adhere to the principle of fairness in treating different types of creditors, safeguard the interests of all stakeholders in accordance with the applicable laws and actively communicate with all its offshore creditors on the Holistic Liability Management Solutions,” the letter details.
The company has asked for the support and cooperation of all its offshore creditors: For the AHG and supportive holders to consider doing so, they request the company to demonstrate its sincerity, in particular in adhering to the principle of fairness as stated in its announcement, by complying with principles set out in the letter during the course of restructuring negotiations and where applicable, in formulating its restructuring proposal.
Those principles as stated are:
- No transaction should be pursued without proper financial and legal due diligence conducted by the holders’ advisors;
- Holders with significant holdings in the notes should have the opportunity to become restricted and negotiate final restructuring terms once the advisers have agreed an information pack covering key areas of diligence;
- The proposed restructuring should respect the different legal rights of the various offshore creditor groups, identified with agreement by the holders’ advisers. It should not benefit one creditor class over another either temporally or with enhanced collateral;
- None of the key offshore assets should be sold or pledged unless prior agreement is reached as part of the restructuring. Cash flows from offshore assets should not be used to support debt service of any onshore debt, and should be reserved for the benefit of their respective offshore obligors; and
- The company shall not transfer any equity stakes in any of their offshore entities without the prior approval of the holders’ advisors.
The letter notes that for avoidance of doubt, the AHG and supportive holders will not support a restructuring proposal prepared without complying with the principles set out above.
The letter requests the company to confirm by return that it agrees to comply with the principles as soon as possible.
—Stephen Aldred