Logan Group is proposing a combination of cash, short-term notes, long-term notes and mandatory convertible bonds to restructure its US$7.562bn of offshore debt.
The Chinese property developer is offering four options to creditors. Option 1 offers US$15 in cash in exchange for every US$100 in principal amount of the offshore debt, with the amount of the debt exchanged under this option capped at US$787m.
Option 2 is a combination of short-term notes and MCBs. For every US$100 in principal amount, creditors will receive US$40 of a five-year 2% bond and US$4 of a two-year MCB. The maximum amount of the debt that can be exchanged under this option is US$3bn.
Option 3 consists only of MCBs on the same terms as Option 2 and is capped at US$3.15bn. Option 4 is a swap of existing notes for a new 10-year 1% bond at par, with the amount capped at US$625m.
For the new five-year bonds, 1% of the principal amount will be redeemed in cash at par immediately after the issuance, 40% on the third year, 30% on the fourth year and the remainder at maturity. For the first two years, the company will pay 0.25% interest in cash and 1.75% in kind. Starting from the third year, all interest will be paid in cash, but the company has the option to defer 1.75% of interest in the third year to the end of the fourth year.
The 10-year note will have 5% redeemed on the sixth year, 5% on the seventh year, 10% on the eighth year, 10% on the ninth year and the remainder at maturity. The interest for the first five years will be paid in kind and starting from the sixth year, all interest will be paid in cash.
Logan's offshore subsidiaries holding two projects in Singapore will provide corporate guarantees for the two new bonds, and shares of the subsidiaries will be pledged as security.
The company will also remit the surplus funds from specific offshore assets, after covering other debt, obligations and liabilities, working capital and litigation contingencies required for Logan's offshore operations for the next 12 months, in a designated account pledged as security for the new notes. Certain onshore projects are also pledged as security.
For the MCBs, 33% of the principal amount will be converted immediately after the issue date, and an amount to be decided will be converted six, 12 and 18 months after, and the remainder at maturity. The conversion price is set at HK$6 per share.
Twelve existing US dollar notes, HK$1.95bn (US$251m) of equity-linked securities, five syndicated loans, eight structured finance and guaranteed debts and a US$1.35bn-equivalent shareholder loan are included in the restructuring. It will be implemented through a scheme of arrangement in Hong Kong and/or the Cayman Islands.
Additional debt totalling US$476m, which includes five secured bank loans, will be restructured by bilateral agreements.
Alvarez & Marsal Corporate Finance, Haitong International Securities and Kroll (HK) are the financial advisers.