20230120-招银国际-Fantasia__Facts_and_thoughts_on_debt_restructuring_4页_451kb

CMBI Credit Commentary Summary

Core Content

Fantasia has announced a debt restructuring plan, which involves converting a portion of its outstanding USD bonds into equity and the remainder into new bonds with varying maturities and coupon structures. This restructuring aims to improve the company's financial structure and provide relief to bondholders while ensuring continued operations.

Main Points

Debt Restructuring Overview

• Total Outstanding USD Bonds: USD4 billion.
• Equity Conversion: USD1.3 billion (32.5%) of the bonds will be converted into equity.
• New Bonds: USD2.7 billion will be exchanged for 8 tranches of new bonds with maturities ranging from Dec'24 to Jun'29.
• Coupon Rates:
  • Cash Coupon: 5%–8%.
  • Coupon with PIK: 7%–10%.
• NPV Estimation: Assuming zero equity value, non-participating bondholders in the Dutch auction at 15pts or lower, and discount rates of 15%–40%, the estimated NPV of the restructured bonds ranges from 18.7% to 43.3%.
• Long Stop Date: 30 Nov'23.

Equity Conversion Details

• Market Cap Before Suspension: Approximately USD150 million.
• Controlling Shareholder: Baby Zeng will hold at least 45% equity post-restructuring.
• Bondholders' Equity Share: At least 52.6% of equity will be held by USD bondholders.

New Money Raise

• Initial New Money: USD100 million from Fortune Alternative (super senior debt) and USD15 million from Baby Zeng (subordinated debt).
• Net Proceeds: After USD25 million in fees and expenses, USD90 million will be used to redeem existing bonds via a Dutch auction at no more than 15 pts.
• Additional New Money: Fantasy will raise an additional USD100 million on a best effort basis, pari passu with the super senior debt.

Approval Thresholds

• Headcount Vote: Over 50%.
• Value Vote: At least 75%.
• Current Adhoc Group Representation: Approximately 24.5% of outstanding USD bonds.

Uncertainties

• Scheme Meeting Structure: Unconfirmed whether there will be 13 separate meetings or a single one.
• Specified Asset Sale: 40% of net proceeds will be deposited in a reserve account for bond redemption, but the specific assets to be sold are unknown.

New Bond Tranches

• Coupon Payment Schedule:
  • All PIK: From now to Dec'25.
  • Cash Coupon Starts: From Dec'25 onwards.

Key Information

• Consent Fee: 0.10%.
• Consent Fee Deadline: 30 Mar'23.
• Step Plan: 9 Apr'23.
• New Issuance Size: USD2,718.356 million.
• CMBI Fixed Income: The report is issued by CMB International Global Markets Limited, a subsidiary of CMB International Capital Corporation Limited, which is itself a subsidiary of China Merchants Bank.

Important Disclosures

• Investment Risks: There are risks associated with investing in securities. Past performance does not guarantee future results.
• No Investment Advice: The report does not provide individually tailored investment advice.
• Liability Disclaimer: CMBIGM is not liable for any losses or damages arising from reliance on the information in this report.
• Conflicts of Interest: CMBIGM may have investment banking relationships with the companies mentioned, which could affect the objectivity of the report.
• Distribution Restrictions:
  • UK: Only for persons falling within Article 19(5) or Article 49(2)(a) to (d) of the Financial Services and Markets Act 2000.
  • US: Intended for "major US institutional investors" only.
  • Singapore: Distributed by CMBI (Singapore) Pte. Limited, an Exempt Financial Adviser, with legal responsibility limited to the extent required by law for non-accredited investors.

Author Certification

• The author certifies that all views expressed in the report accurately reflect their personal views.
• No compensation was directly or indirectly related to the specific views in this report.
• The author has not traded in the securities covered in the report within 30 days prior to issuance and will not trade within 3 business days after issuance.
• The author does not serve as an officer of any Hong Kong listed company covered in this report and has no financial interests in such companies.