Kobre & Kim held a call with offshore bondholders of Country Garden Holdings today, Aug. 29, at 9 p.m. Hong Kong time, during which the law firm advised holders that they should begin forming groups to protect their interests, regardless of whether two missed coupons on offshore bonds - which Reorg has reported totalled around $22.5 million - are paid before a 30-day grace period expires on Sep. 5.
Kobre & Kim further advised on the call that regardless of payment of the coupons on the two offshore USD notes, the potential exists for onshore creditors to be favored over offshore creditors, noting that the company had
reportedly hired CICC for a potential onshore restructuring and had engaged in negotiations with certain onshore creditors, opportunities which had not been advanced to offshore bondholders.
Kobre & Kim lawyers guided on the call potential legal actions creditors can take to realize the value of Country Garden’s onshore and offshore assets via court proceedings in New York, Hong Kong, the British Virgin Islands and on the Chinese Mainland. The lawyers also warned creditors of an intercreditor agreement that covers about $17 billion of the company’s debt, including all of its offshore notes, several club loans and certain hedging obligations with specific investors. The intercreditor agreement, which is not public, could potentially limit bondholders’ ability to take actions such presenting winding-up petitions. Such agreement could require 25% or more participating creditors to agree before any action can be taken.
Reorg
first reported on Aug. 8 that holders of Country Garden’s $500 million 4.2% notes due 2026 and $500 million 4.8% notes due 2030 had yet to receive coupon payments which were due on Aug. 7, both of which have 30-day grace periods. Those coupons, totalling around $22.5 million, have yet to be paid. Following news of the non-payment, Country Garden issued a
profit warning on Aug. 11 stating it was considering adopting “various debt management measures” to safeguard its long term development. Reorg
reported the same day that the developer had started preparation for an onshore restructuring, and that CICC had been engaged as a financial advisor.
On Aug. 14, the company
announced it had suspended trade in all its onshore bonds. Subsequently the company has been engaged in negotiations with holders of its CNY 3.904 billion ($538 million) 5.6% onshore private bond due Sept. 2, “16 Bi Yuan 05”, initially to extend the principal for three years via amortization payments,
as reported, but subsequent to holders demanding
full repayment, Country Garden has proposed to add a 40-day grace period for the bond and is convening a second bondholders’ meeting to vote on that proposal and other amendments to event of default and default provisions in the bonds indenture.
Kobre & Kim also drew bondholders’ attention to substantial variation in the value of a sale the company had achieved for its 26.7% interest in Asian Games City, held through Guangzhou Lihe Real Estate Development Co. Ltd.
Reorg reported the transaction was valued at the equivalent of $177.2 million, and Kobre & Kim noted that compared to the $252.47 million that Shimao Group and Agile Group had received from the same buyer, Guangzhou Zhonghai Property Co. Ltd.
- Stephen Aldred, Anna Zhang