Fantasia signs restructuring support agreement with ad hoc group

By Marisa Wong

Los Angeles, Jan. 13 – Fantasia Holdings Group Co., Ltd. signed a restructuring support agreement on Friday with an ad hoc group of holders of about 24.5% of the aggregate principal amount of its existing notes, according to a company announcement.

Proposed restructuring

Fantasia and its advisers have in the past few months been in talks with various stakeholders on the proposed restructuring of the company’s offshore debt.

Progress has been made with a number of major holders of the company’s dollar-denominated senior notes in the aggregate principal amount of $4,018,000,0000, listed below.

These discussions have culminated with an agreement in principle on the terms of the restructuring of the existing notes and some other offshore debt in a way that allows the company to comprehensively enhance its capital structure, enable it to better manage its operations and deliver long-term value for all its stakeholders.

The proposed restructuring is expected to be implemented by way of parallel schemes of arrangement in Hong Kong and the Cayman Islands.

Transaction highlights

The proposed restructuring is expected to equitize $1.3 billion of the company’s total interest-bearing and debt-like liabilities, which represents a material de-leveraging of the company’s offshore debt.

The offshore debt equitization (where creditors will receive ordinary shares of the company) will increase the company’s book value significantly and reduce the net-gearing ratio of the company.

Zeng Jie, Baby will remain as the largest controlling shareholder of Fantasia upon completion of the proposed restructuring.

As part of the proposed restructuring, creditors will also receive eight series of new dollar-denominated notes that mature from December 2024 to June 2029. The new notes will have cash interest rate ranging from 5% to 8%, following initial pay-in-kind periods.

The new notes will have a cash sweep mechanism from net onshore project disposal proceeds. The company has identified some projects which it is looking to dispose of in the future. The restructuring aims to apply 40% of the net proceeds from those disposals for the cash sweep of the new notes.

Following the proposed restructuring, the offshore debt maturity profile of the company will be extended by two to 6.5 years from December 2022, with no offshore debt maturity earlier than December 2024. This gives the company a two-year period to stabilize and improve its operations. The company said it believes that this two-year period is essential in ensuring delivery of various construction projects. The cash interest expenses of the offshore debt will also be significantly reduced during this two-year period, which in turn will improve the company’s cash to short-term debt ratio.

In addition, the company plans to raise new funds to finance a debt buyback by way of open offer. Raising of new funds will be a condition precedent to the completion of the proposed restructuring.

Existing notes

The existing notes affected by the proposed restructuring are as follows:

• 7 3/8% senior notes due Oct. 4, 2021 (ISIN: XS1498418224), with $205,656,000 outstanding;

• 6.95% senior notes due Dec. 17, 2021 (ISIN: XS2275739378), with $249.5 million outstanding;

• 15% senior notes due Dec. 18, 2021 (ISIN: XS1924249680) with $299 million outstanding;

• 14½% senior notes due March 17, 2022 (ISIN: XS2321397734) with $50 million outstanding;

• 11¾% senior notes due April 17, 2022 (ISIN: XS1982124239) with $297.5 million outstanding;

• 7.95% senior notes due July 5, 2022 (ISIN: XS164067688) with $498.75 million outstanding;

• 12¼% senior notes due Oct. 18, 2022 (ISIN: XS203032935) with $350 million outstanding;

• 10 7/8% senior notes due Jan. 9, 2023 (ISIN: XS2100005771) with $446.35 million outstanding;

• 11 7/8% senior notes due June 1, 2023 (ISIN: XS2181037230) with $542 million outstanding;

• 9¼% senior notes due July 28, 2023 (ISIN: XS2210790783) with $343.5 million outstanding;

• 9 7/8% senior notes due Oct. 19, 2023 (ISIN: XS2245488262) with $304.5 million outstanding;

• 10 7/8% senior notes due March 2, 2024 (ISIN: XS2306557401) with $231.6 million outstanding; and

• 14½% senior notes due June 25, 2024 (ISIN: XS2355049797) with $200 million outstanding.

RSA effectiveness

Some provisions under the RSA will only become effective on the effective date, which is the earlier of (i) the date on which the company and the ad hoc group reach a revised agreement on the terms of the offshore debt equitization and (ii) March 9.

The provisions which become immediately effective on the signing date include that each participating creditor undertakes not to sell, transfer or otherwise dispose of an interest in participating debt unless the transfer has been made in accordance with the transfer provisions of the RSA.

The company and the ad hoc group intend to enter into further negotiations, including with other interested parties, on the terms of the offshore debt equitization. The company and the ad hoc group may amend the RSA prior to the effective date to reflect any agreement regarding that.

Consent fee

The company said it will make a further announcement following the effective date in order for the participating creditors who hold eligible participating debt to accede to the RSA and receive a cash consent fee.

Contact details

Morrow Sodali Ltd. is the information agent. The RSA will be accessible on the transaction website of Morrow Sodali (https://projects.morrowsodali.com/fantasia; fantasia@investor.morrowsodali.com; attn.: debt services team) beginning Jan. 16.

Any requests for information on the proposed restructuring can be directed to the company’s financial adviser, Houlihan Lokey (China) Ltd. (fantasia@hl.com), or the ad hoc group’s financial adviser, PJT Partners (HK) Ltd. (projectsling@pjtpartners.com).

At the request of the company, trading in the shares of the company on the Stock Exchange of Hong Kong Ltd. was suspended with effect from April 1, 2022. Trading will remain suspended until further notice.

Fantasia is a property development company based in Shenzhen, China.

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