Reorg on the Record: Asia sees first China real estate HY issue since late 2021…
Thu Jan 26, 2023 5:50 pm

After a year of multiple defaults in China’s real estate sector, with the country’s ‘Three Red Lines’ policy, frozen escrow accounts, and opaque restructuring processes all contributing to substantial losses in Asian high-yield markets, 2023 has kicked off with two signature deals that suggest a better year could lie ahead.

Dalian Wanda Commercial Management on Jan. 12 priced a $400 million two-year bond yielding 12.375%, taken by many as the reopening of the debt capital markets for high-quality performing China property names. The issue was 3.7x oversubscribed, attracting the likes of Fidelity, PIMCO, Blackrock and PAG as subscribers, and marked the first offshore dollar bond since late 2021 for the broader China property sector.

That was quickly followed by Chinese estate developer Fantasia Holdings Group announcing it had signed an RSA with an ad-hoc group of holders of its dollar bonds, in a proposed restructuring that would give foreign creditors majority equity control of a major listed developer through a debt-to-equity swap. The restructuring plan, to some, offers a potential path forward to resolve creditor disputes with China’s defaulted real estate developers.

Along with China’s canceled Covid Zero policy, the two deals have generated a mood of cautious optimism. What remains to be seen is whether consumer confidence – and improved contracted sales – will return to buoy the country’s battered real estate market.

Stephen Aldred

Our Asia teams are delivering the most in-depth data, analysis and reporting on hundreds of credits that are either stressed, distressed, performing, going through restructuring or post-reorg. Below is a glimpse into our editorial offering:

China Real Estate
In a market-moving scoop, we reported a list of real estate companies that are expected to benefit from Chinese regulators-led “balance sheet improvement.” Country Garden and Seazen Group bonds went up across the curve following our report. Investors have been speculating which companies will be supported by the government and which ones will be left hanging, and our report largely settled the speculation. » Continue Reading

VRL (Vedanta Resources Ltd.) utilizes a dual issuance credit structure for its USD bonds. This combined with the differing credit enhancements, both as between the USD bonds of different issuers as well as among the bonds issued by the same issuer, gives rise to potential subordination and claim recovery considerations. These considerations are further complicated by the group’s financing mix beyond the USD bonds. In this analysis, Reorg explores these issues – which could be important in terms of recovery prospects in certain downside scenarios – alongside highlighting some of the key provisions under the USD bonds. » Continue Reading

Garuda Indonesia
Indonesia flag carrier PT Garuda Indonesia Tbk on Dec. 30 filed a lawsuit against lessors Greylag Goose Leasing and Greylag Goose Leasing Designated Activity Company to the Central Jakarta Commercial Court, and is requesting that the court declare both defendants in contempt of court, while seeking to force them to drop any efforts to seek payment outside the composition plan sanctioned by the court on June 17, 2022, according to a court document (Bahasa Indonesia). » Continue Reading

Chinese online video platform iQIYI Inc., which has retained Kirkland & Ellis and Houlihan Lokey as its respective legal and financial advisors, is considering extending its convertible bonds as part of an overall plan to alleviate debt pressure, said two sources familiar with the matter. iQIYI Inc. earlier announced on Jan. 3 the closing of a private placement of $500 million in secured convertible 6% five-year senior notes to PAGAC IV-1 (Cayman) Ltd. The notes are convertible into iQIYI’s American depositary shares (ADS) at an initial conversion rate of 216.9668 ADSs per $1,000 principal amount of the notes. » Continue Reading

Each episode of Reorg’s weekly EMEA Core Credit podcast series features detailed discussion on issues and companies across the credit lifecycle. This week’s podcast from the team in Europe includes discussion of U.K. value retailer Matalan’s new recapitalization agreement and German real estate Adler Group’s restructuring. Listen now.

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