China South City gets consents to amend five notes ahead of deadline

By Marisa Wong

Los Angeles, July 27 – China South City Holdings Ltd. announced it received sufficient support from noteholders under its consent solicitation for five series of notes as of 6 a.m. ET on July 27.

As announced on July 21, the company is seeking consents from holders of its 11½% senior notes due 2022 (ISIN: XS2085883119), holders of its 10 7/8% senior notes due 2022 (ISIN: XS2120092882), holders of its 7¼% senior notes due 2022 (ISIN: XS1720216388), holders of its 11.95% senior notes due 2023 (ISIN: XS2238030162) and holders of its 10¾% senior notes due 2023 (ISIN: XS2227909640).

The consent solicitation expires at 11 a.m. ET on July 29. However, the company was able to obtain the necessary consents two days prior to the expiration, according to a company announcement Wednesday.

The success of the consent solicitation enables the company to improve its liquidity and cash flow management by extending the maturity of the notes and implementing the payment of principal of the notes in installments.

Additionally, the company is now permitted to redeem any outstanding 7¼%, 11.95% and 10¾% notes at any time at par plus interest.

The interest rate of the notes will also be aligned.

The consent solicitation also gives the trustee and the holders the benefit of the ability to trigger an event of default under the notes if the keepwell provider fails to comply with the terms of the keepwell deed.

As previously reported, the consent solicitation for all of the notes constitutes a single proposal. No series is an individual proposal.

In terms of additional background for the consent solicitation besides the hardships on Chinese property developers over the last couple of years, on May 16 Shenzhen SEZ Construction and Development Group Co., Ltd. became the company’s single largest shareholder.

A consent solicitation was held in June for the same five series.

The previous consent solicitation dealt with Shenzhen’s ownership stake in the company.

China South City previously said it has been actively working to obtain financing and generate sufficient cash flow to meet its financial commitments. An extension of the maturity date of the notes allows the company more time to put in place such financing.

Had the consent solicitation been unsuccessful, China South City might not be able to fully repay the principal or interests on the notes when they become payable and an event of default would be expected. In that case, the company would consider an alternative debt restructuring exercise.

Because the consent solicitation is successful, Shenzhen SEZ will enter into a keepwell deed with Citicorp International Ltd. as trustee of the notes.

Noteholders who delivered consents by the 11 a.m. ET on July 27 early deadline will receive a $10 consent fee per $1,000 note. Noteholders consenting after the early deadline but before the expiration date are eligible for $5 per $1,000 note.

Acceptance of the consents and payment of the consent fee are conditioned on holders representing at least 75% of the notes in each series consenting to the changes.

The consent date is the date the required consents have been received by 11 a.m. ET on that date.

The payment date is expected for Aug. 9.

Credit Suisse (Hong Kong) Ltd. and China Citic Bank International Ltd. are the solicitation agents.

The information and tabulation agent is Morrow Sodali Ltd. (+852 2319 4130, +44 20 4513 6933, csc@investor.morrowsodali.com, https://projects.morrowsodali.com/csc).

Hong Kong-based China South City develops and operates integrated logistics and trade centers in China.

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