Jiayuan International launches exchange offer for six series of notes

By Marisa Wong

Los Angeles, Aug. 24 – Jiayuan International Group Ltd. has begun an exchange offer for six series of notes with minimum thresholds, according to a company announcement Wednesday.

The company is offering to exchange at least

• $89,325,000, or 90%, of the outstanding principal amount of its 11 3/8% senior notes due October 2022 (ISIN: XS2475749300) for new 6½% senior notes due Jan. 29, 2025;

• $180 million, or 90%, of the outstanding principal amount of its 12% senior notes due October 2022 (ISIN: XS2247215283) for new 6½% senior notes due Jan. 30, 2025;

• $158,143,500, or 90%, of the outstanding principal amount of its 13¾% senior notes due February 2023 (ISIN: XS2066357034) for new 6½% senior notes due May 18, 2025;

• $270 million, or 90%, of the outstanding principal amount of its 12½% senior notes due April 2023 (ISIN: XS2233091359) for new 6½% senior notes due July 8, 2025;

• $270 million, or 90%, of the outstanding principal amount of its 12½% senior notes due July 2023 (ISIN: XS2279822683) for new 6½% senior notes due Oct. 21, 2025; and

• $207 million, or 90%, of the outstanding principal amount of its 11% senior notes due February 2024 (ISIN: XS2333154867) for new 6½% senior notes due May 17, 2026.

The company is also soliciting consents to amend five of those series, namely all but the July 2023 notes. The company is seeking approval of some proposed waivers and amendments to each of the indentures governing those notes.

Background and purpose

The company explained that it is conducting the exchange offer and consent solicitation for all of its existing U.S. dollar-denominated senior notes due to adverse market conditions for real estate developers in China.

As a result, the company is seeking to do the following:

• Exchange the existing notes for new notes that are designed to extend the company’s debt maturity profile and ease its liquidity pressure;

• Waive any defaults and potential consequential events of default under the consent notes arising directly or indirectly from non-payment events in relation to interest payment and judgment for payment of money; and

• Amend the terms of the consent notes to substantially eliminate or amend the restrictive covenants and other provisions in those indentures to provide greater flexibility for the company’s continued efforts to strengthen its balance sheet and cash flow management.

The company said it believes that the exchange offer and consent solicitation, if successfully completed, could significantly improve its financial position, extend its debt maturity, improve its cash flow, better complete its project delivery tasks and enhance its debt performance capability.

To facilitate the implementation of a restructuring of the existing notes, the company may, in addition to the exchange offer and consent solicitation, consider launching a scheme of arrangement in Hong Kong (or a scheme of arrangement in any other relevant jurisdiction at the discretion of the company) to effect a restructuring of the existing notes on terms similar to the exchange offer and consent solicitation but open to all holders of the notes, including U.S. persons under Regulation S.

Offer details

The exchange offer and consent solicitation will expire at 11 a.m. ET on Sept. 7 and are expected to settle on Sept. 14.

The exchange and consent consideration (or simply exchange consideration in the case of the July 2023 notes) will consist of $1,000 principal amount of new notes, a deferred interest consideration and an incentive fee.

If the consent solicitation is not completed and a scheme is launched and consummated, there will be an instruction fee of 0.25% on existing notes tendered in the exchange offer and consent solicitation and restricted in the restructuring support agreement on or before 11 a.m. ET on Sept. 8. The instruction fee will be paid on the restructuring effective date.

Morrow Sodali Ltd. (+44 20 4513 6933 or +852 2319 4130; jiayuan@investor.morrowsodali.com; https://projects.morrowsodali.com/jiayuan) is the information, exchange and tabulation agent with respect to the exchange offer and consent solicitation.

Suspended coupons

The interest payment in the amount of $18.75 million under the July 2023 notes became due and payable on July 21.

Under the terms of the July 2023 notes, the company has a grace period of 30 days to pay the interest and the last day of the grace period was Aug. 20.

To facilitate the overall debt management scheme and to be fair to all creditors, the company has suspended payment of that interest due on the July 2023 notes.

The company has also suspended interest payments due on the February 2024 notes and its 7% green convertible bonds due January 2025 (ISIN: XS2368463779).

The company expects that it may not be in position to pay interest in the respective amounts of $3.5 million and $12.65 million before expiry of grace periods for the January 2025 convertible bonds and the February 2024 notes. Those interest payments were due July 27 and Aug. 17, respectively, with the grace period ending Aug. 26 and Sept. 16, respectively.

The expected non-payment will constitute an event of default under each of the January 2025 convertible bonds and the February 2024 notes upon expiration of the relevant grace period. As of Aug. 24, such event of default has not occurred.

The company has appointed Guotai Junan Capital Ltd. as its financial adviser and Sidley Austin as its legal adviser.

The property developer is based in Hong Kong.

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