Zhongliang Holdings has made decisive progress in debt restructuring, with 79% of its creditors agreed, and their refusal to pay principal and interest on overseas debts caused a dispute

Cai Lian News Agency on September 5 (Editor Yang Bin) On the evening of September 4, Zhongliang Holdings announced the latest progress of overseas debt restructuring plans. According to the announcement, the agreed creditors, who account for about 79% of the planned debt, have joined the restructuring support agreement, and the support of more than 75% of the creditors is a positive indicator of the implementation of the restructuring plan. Zhongliang Holdings has a total of 5 existing US dollar bonds with a total size of US$929.3 million, all of which have defaulted. Last year, Zhongliang Holdings publicly announced that it would suspend the payment of all overseas debt principal and interest, and give priority to paying off domestic debts, causing market controversy.

RMB6.7 billion of outstanding overseas debt restructuring plan, approved by 79% of creditors

Zhongliang Holdings announced that after extending the deadline for the cost of the restructuring support agreement, the agreed creditors, which account for about 79% of the planned debt, have joined the restructuring support agreement.

On June 1, Zhongliang Holdings issued a progress announcement on the overall solution of the company's overseas debt. According to the announcement, the total outstanding principal amount of the company's existing notes involved in Zhongliang Holdings' announcement is US$929.3 million, which is equivalent to RMB6.7 billion according to the latest exchange rate. The Company signed terms and conditions with the creditor panel on May 31 to agree on the note repayment plan. The notes held by this segment of the creditors represent approximately 19% of the outstanding principal amount of the Company's existing Notes, or approximately $176 million.

The core of the instrument repayment scheme is a 3.5-year extension, and the main terms and conditions are:

(1) a cash payment of an upfront principal payment equal to 1% of the outstanding principal amount of the Scheme Debt held;

(2) the aggregate principal amount equal to 99% of the outstanding principal amount of the Scheme Debt held plus all accrued and unpaid interest on the Scheme Debt as at the effective date of the Restructuring into a combination of New Senior Notes and New Convertible Notes (available to Scheme creditors at their option);

(3) The new senior notes and new convertible bonds have a maturity of 3.5 years from the new issue date, the cash coupon of the new senior notes is 5%, the cash coupon of the new convertible bonds is 3%, and the interest for the first 12 months has a de facto grace period arrangement, and the cash interest will accrue from the end of 12 months after the commencement date without cash interest payment.

(4) In addition to the aforementioned 1% upfront cash payment, the Company will pay an additional restructuring support fee equal to 0.25% of the total principal amount of the eligible debt held to the holders of the restructuring.

On July 16, Zhongliang Holdings announced that the creditors' panel and holders of existing notes that have joined the restructuring support agreement account for approximately 38.5% of the total outstanding principal amount of the existing notes. Zhongliang Holdings said that the implementation of the overall solution will reduce the company's overseas debt pressure and provide sufficient financial flexibility to enable the company to better manage its business operations and maximize value for all stakeholders. To facilitate the successful implementation of the overall solution, broad support is required, and the Company urges all creditors who have not yet joined the restructuring support agreement and hold the planned debt to do so as soon as possible. On August 15, Zhongliang Holdings announced again that holders accounting for about 71% of the planned debt had joined the restructuring support agreement or had provided instructions to join the restructuring support agreement.

According to the requirements of offshore agreement restructuring, obtaining the support of more than 75% of creditors is a positive indicator of the restructuring plan, and the plan can be formally implemented only after the approval of the creditors' general meeting and the completion of court procedures. Today, consenting creditors, representing about 79 percent of planned debt, have joined the restructuring support agreement. Industry insiders said, "The support of more than 75% of creditors not only means that the restructuring plan will proceed smoothly, but also shows the majority of creditors' recognition of Zhongliang's positive practice of social responsibility and sustainable operation in the future." ”

He refused to pay interest on the principal of overseas debts for "guarantee"

According to the Enterprise Early Warning Communication, Zhongliang Holdings has a total of 5 existing US dollar bonds with a total size of US$929.3 million, which is consistent with the disclosure of the above-mentioned restructuring plan. All five US dollar bonds have defaulted.

Photo: Zhongliang Holdings US dollar bonds

(Source: Enterprise Early Warning Communication, compiled by CaiLian News)

Zhongliang Holdings completed two rounds of note exchange offers in May and June 2022 to avoid debt default. However, on July 29, 2022, Zhongliang Holdings officially defaulted for the first time and failed to pay a 9.5% senior note when due. After the default of US dollar notes, after Zhongliang Holdings officially announced its default, it took a series of contraction actions, reducing land acquisition, streamlining personnel, and selling assets. At the same time, like most real estate companies, Zhongliang Holdings has chosen the strategy of "guaranteeing inside". In November 2022, Zhongliang Holdings publicly announced that it would suspend the payment of principal and interest on all overseas debts, and did not expect to pay the interest payable on the two notes due April 2023 during the grace period. Since then, the domestic debt has been fully repaid.

In February this year, Zhongliang Holdings issued an overall solution to overseas debt, but failed to enter into a formal agreement with creditors. On April 14, Zhongliang Holdings defaulted again on two notes totaling US$424 million. Perhaps it was this default that led to significant progress in the restructuring of Zhongliang Holdings' overseas debt, and the successful conclusion of terms and conditions with creditors.

After the latest debt restructuring plan was released yesterday, Zhongliang Holdings' US dollar bonds have not changed. Hong Kong stock Zhongliang Holdings (02772. HK) closed down 21.28% today at HK$0.370.

In the first half of the year, net profit attributable to the parent decreased by 95% year-on-year, reducing interest-bearing debt

On August 25, Zhongliang Holdings released its interim results. In the first half of the year, Zhongliang Holding Group achieved revenue of RMB 28.851 billion, an increase of 29.12% year-on-year; The profit attributable to the owners of the parent company was 18.628 million yuan, a year-on-year decrease of 95.75%. Excluding impairment losses on various assets, fair value losses on investment property valuations and exchange losses, adjusted net profit attributable to owners was RMB1.22 billion, down approximately 12% year-on-year.

In the first half of 2023, Zhongliang Holding Group achieved contracted sales (including subsidiaries, joint ventures and associated companies of the Group) of approximately RMB21.03 billion, a year-on-year decrease of approximately 46%. The average contract selling price in the first half of 2023 was approximately RMB10,200 per square meter, compared to approximately RMB10,300 per square meter in the same period last year. As at 30 June 2023, the Group, together with its joint ventures and associated companies, had a total land bank of approximately 36.6 million square metres (including sold floor area), covering five major economic zones in China.

In terms of assets and liabilities, as of June 30, 2023, Zhongliang Holding Group's net current assets were approximately RMB10.384 billion (approximately RMB14.746 billion at the end of 2022). Specifically, the Group's total current assets decreased from RMB211.736 billion at the end of 2022 to approximately RMB195.27 billion as at 30 June 2023. According to the half-year report, the decrease in the Group's total current assets was mainly due to the decrease in properties under construction; and lower cash and bank balances. The Group's total current liabilities decreased from approximately RMB196.99 billion at the end of 2022 to approximately RMB184,886 million as at 30 June 2023. In the first half of the year, Zhongliang continued to control interest-bearing liabilities, and the total interest-bearing liabilities have now been compressed to about 23.1 billion yuan as of June 30, 2023 (at the end of 2022, the total interest-bearing debt of Zhongliang Holdings was about 26.735 billion yuan), and the net debt ratio dropped to 27.6%.

This article is from Cai Lian News Agency Yang Bin