Cai Lian News, August 11 (Editor Yang Bin) China Aoyuan announced the latest progress of debt restructuring. On the evening of August 10, China Aoyuan announced on the Hong Kong Stock Exchange that creditors holding 75.89% of the principal amount of Aoyuan's existing notes had formally signed or agreed to a restructuring support agreement. At the beginning of the July restructuring plan, 33% of creditors agreed, and the final approval of the plan was marked by the approval of more than 75% of creditors. At present, China Aoyuan has a total of 10 US dollar bonds, with a total value of 3.188 billion US dollars. All 10 bonds have defaulted, and 5 of them are overdue.
More than 75% of creditors have agreed to debt restructuring agreements
China Aoyuan said that at present, the creditors holding 75.89% of the principal amount of Aoyuan's existing notes have formally signed or agreed to the restructuring support agreement. Among them, some non-ICA creditors have signed or agreed to restructuring support agreements. At the same time, in response to the request of creditors, the Company has decided to extend the deadline for restructuring support agreement fees to 5pm on August 31 to allow more creditors to obtain restructuring support agreement fees.
According to the previous restructuring agreement, China Aoyuan divided the creditors into ICA creditors and non-ICA creditors. ICA creditors can participate in the ADD HERO (Add Hero Holdings Limited, a wholly-owned direct subsidiary of Aoyuan) and China Aoyuan at the same time, and enjoy the benefits of both schemes, while non-ICA creditors can only participate in the latter, namely China Aoyuan's restructuring plan. This will result in ICA creditors' recovery rates doubling compared to those of non-ICA creditors.
On July 2, China Aoyuan announced that it had reached an agreement with a group of creditors composed of certain overseas senior note holders (accounting for about 33% of the total outstanding principal) on the main terms of a comprehensive restructuring plan for overseas debt. Under the restructuring plan, China Aoyuan will issue new financing instruments to replace the original bonds, including four new debt instruments totaling US$2.3 billion (of which three new debt instruments totaling US$1.8 billion were issued by Add Hero Holdings Limited) with a maturity of 2031, 1.4 billion ordinary shares, US$143 million interest-free mandatory convertible bonds and US$1.6 billion perpetual bonds.
It is reported that after the issuance of compulsory convertible bonds and perpetual bonds, it is expected to be recorded as "equity" of China Aoyuan. Together with the debt-to-equity swap in the plan, if the restructuring plan is completed, the net assets of the listed company will increase significantly by not less than US$3.6 billion, and the asset-liability ratio will be significantly improved, allowing the company to travel light. The restructuring of China Aoyuan, characterized by debt-to-equity swap + rollover, is a very typical case of debt disposal of real estate enterprises. According to Yan Yuejin, research director of E-House Research Institute, if the restructuring is successful, it will be an important event with industry benchmarking significance, and it will also give other real estate enterprises a reference model for debt restructuring.
It is worth noting that Aoyuan's restructuring plan requires the approval of a majority of creditors attending the relevant bond meeting, with a minimum of 75% before the plan can be approved. At present, this goal has been achieved. China Aoyuan said it was encouraged by the strong support it has received from creditors so far.
The loss in two years exceeded 40 billion, and the re-issuance of financial reports may be resumption
At the same time as the debt restructuring plan, China Aoyuan also issued a re-issued full-year 2021, 2022 interim and 2022 full-year performance reports. In 2021, the total turnover of China Aoyuan was 50.022 billion yuan, down 17.772 billion yuan from 67.794 billion yuan in 2020, a year-on-year decrease of 26.2%; In 2021, the gross profit of China Aoyuan was -11.935 billion yuan, down 174.2% from the gross profit of 16.081 billion yuan in 2020, and the gross profit margin was -23.9%. In 2021, the loss attributable to owners of China Aoyuan Company was RMB33,075 million, down 659.9% from the profit of RMB5,908 million in 2020.
In 2022, some financial indicators such as gross profit margin of China Aoyuan improved, but the overall pressure remained. In 2022, the total turnover of China Aoyuan was RMB18.711 billion, a decrease of RMB31.311 billion, or 62.6%, from RMB50.022 billion in 2021. During the same period, China Aoyuan's gross profit was 841 million yuan, an increase of 107% from -11.935 billion yuan in 2021, and the gross profit margin was 4.5%. In 2022, the loss attributable to owners of China Aoyuan was RMB7,843 million, an increase of 76.3% from the loss of RMB33,075 million in 2021. In 2021 and 2022, China Aoyuan lost a total of about 40.918 billion yuan.
In January 2022, China Aoyuan officially announced that it had defaulted on its US dollar bonds. From April 1, 2022, trading of China Aoyuan shares will be suspended on the Hong Kong Stock Exchange. At present, China Aoyuan has been suspended for 16 months, and according to the relevant regulations of the Hong Kong Stock Exchange, listed companies will face the risk of delisting if they cannot resume trading after 18 months of suspension. Industry insiders believe that the issuance of three consecutive financial reports and the disclosure of debt restructuring plans and progress may be preparations for the resumption of trading by China Aoyuan.
Judging from the performance of the first six months of 2023, the cumulative sales of unaudited property contracts of China Aoyuan were about RMB7.48 billion, and more than ninety percent of real estate projects were on schedule and schedule. Aoyuan said that in the future, it will continue to ensure the completion and delivery of the project, while integrating resources to revitalize the construction and sales of the project, reduce operating expenses, and strive to improve liquidity. In terms of guaranteed delivery, from January to June this year, China Aoyuan delivered about 19,000 units, with a delivery area of about 2.353 million square meters.
Insolvent, all 10 dollar bonds have defaulted
As of the end of 2022, China Aoyuan had total assets of approximately RMB234.426 billion, total liabilities of RMB252.063 billion, and total equity of -RMB17.637 billion. The financial report mentioned that due to repayment default and cross-default, the company's current liabilities exceeded current assets by about 29.869 billion yuan. Bank and other borrowings, as well as senior notes and bonds, totalled RMB109.05 billion, of which RMB99,446 million will mature by the end of 2023.
As for interest-bearing liabilities among liabilities, as of December 31, 2022, China Aoyuan had total overseas interest-bearing liabilities of approximately RMB42.818 billion, of which RMB29.144 billion was part of the mutual agreement of creditors, and total domestic interest-bearing liabilities were approximately RMB66.232 billion.
According to the Enterprise Early Warning Communication, China Aoyuan Group Co., Ltd. (China Aoyuan, HK.03883) has a total of 10 US dollar bonds with a total size of US$3.188 billion. All 10 bonds have defaulted, and 5 of them are overdue. Aoyuan Group Co., Ltd., which is 100% owned by China Aoyuan, has 8 existing domestic bonds with a scale of 6.865 billion yuan. On July 20, Aoyuan Group Co., Ltd. was filed for bankruptcy reorganization.
Photo: Chinese dollar bonds issued by China Aoyuan
(Source: Enterprise Early Warning Communication, compiled by CaiLian News)
According to China Aoyuan's own calculations, the total unleveraged free cash flow of development projects is expected to be about 64.3 billion yuan in the next ten years or so, and the cumulative cash after repaying project-level debt is expected to be about 18.5 billion yuan. The net proceeds from the disposal of certain onshore and offshore assets are expected to be approximately $8 billion to $13.8 billion.
China Aoyuan's dollar bonds fell after the latest debt restructuring progress was announced. CAPG 7.95 06/21/24 issued by China Aoyuan is now priced at $4.372, down 1.869%; CAPG 6.35 02/08/24 is trading at $4.333, down 1.422%; CAPG 5.88 03/01/27 is trading at $4.368, down 1.411%.
Chart: China Aoyuan CAPG 7.95 06/21/24 price action
(Source: Wind, compiled by CaiLian News)
This article is from Cai Lian News Agency Yang Bin
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