20220113-招银国际-YUZHOU-Exchange_and_consent_solicitation_3页_435kb

CMBI Credit Commentary - YUZHOU Summary

Core Content

Yuzhou has initiated an exchange offer and a consent solicitation to restructure its debt obligations. These actions are part of a broader strategy to manage its financial distress and extend maturity dates for its bonds.

Exchange Offer

The exchange offer is designed to restructure two of Yuzhou's bonds:

• YUZHOU 8.65% '22 (outstanding USD242.069 million)
• YUZHOU 6% '22 (outstanding USD340 million)

Key Terms of the Exchange Offer

• Upfront Repayment: Holders will receive 5 points in cash.
• Incentive Cash: An additional 1 point in incentive cash.
• New Notes: Holders will exchange 95 points of principal into new notes.
• Coupon Rate of New Notes: 7.8125% (lower than the existing 8.65% and 6%).
• Maturity Date of New Notes: 21 January 2023 (extended from the original 23 January 2022 and 25 January 2021).
• Acceptance Threshold: At least 90% of the principal amount of each original bond must be tendered.
• Deadline: 19 January 2022

The terms of the exchange are consistent with similar actions by Yuzhou's industry peers, indicating a common trend in distressed debt restructuring.

Consent Solicitation

Yuzhou is also seeking consent to amend the terms of its remaining bonds (excluding perpetuals, outstanding total USD4.9 billion) to include a cross-default clause. This means that the default of the 8.65% '22 and 6% '22 bonds will trigger a default on the remaining bonds.

Key Terms of the Consent Solicitation

• Consent Fee: 0.25 points.
• Consent Threshold: 50% of the principal amount of each remaining bond.
• Deadline: 19 January 2022

This approach is becoming increasingly common in exchange offers, as it helps to minimize hold-out by ensuring broad agreement among bondholders.

Additional Information

• The exchange and consent solicitation are part of Yuzhou's broader financial restructuring efforts.
• The company has entered into a framework agreement to sell its residential property management operations to China Resources Mixc (1209 HK) for approximately RMB1 billion, with the transaction expected to be completed in mid-2022.
• These actions reflect Yuzhou's need for additional time to manage its repayment obligations and complete asset disposals.

Contact Information

• Glenn Ko, CFA – 高志和
  Tel: (852) 3657 6235
  Email: glennko@cmbi.com.hk

• Polly Ng – 吴宝玲
  Tel: (852) 3657 6234
  Email: pollyng@cmbi.com.hk

• James Wen – 温展俊
  Tel: (852) 3757 6291
  Email: jameswen@cmbi.com.hk

• CMBI Fixed Income
  Email: fis@cmbi.com.hk

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