Powerlong launches exchange offer, two consent bids for eight notes

By Marisa Wong

Los Angeles, June 21 – Powerlong Real Estate Holdings Ltd. announced an exchange offer relating to three series of notes, a consent solicitation relating to three other series of notes and a concurrent consent solicitation relating to two additional series of notes, according to a notice.

Exchange offer

On June 21, Powerlong began its offer to exchange the following series, listed with the exchange consideration per $1,000 principal amount:

• $21,294,000 outstanding 4% senior notes due July 2022 (ISIN: XS2368100033) (“July 2021 notes”) for $1,000 principal amount of new July 2024 notes, a $2.50 cash incentive fee and the July 2021 additional entitlement;

• $37,259,000 outstanding 7 1/8% senior notes due November 2022 (ISIN: XS2078556342) (“November 2019 notes”) for $1,000 principal amount of new January 2026 notes, a $2.50 cash incentive fee and the November 2019 additional entitlement; and

• $420 million outstanding 6.95% senior notes due July 2023 (ISIN: XS2030333384) (“July 2019 notes”), subject to a minimum acceptance amount of $378 million, for $970 principal amount of new December 2025 notes, a $2.50 cash incentive fee and a deferred interest consideration.

The additional entitlement for the July 2021 and November 2019 notes is an amount equivalent to accrued interest in cash.

The July 2024 new notes will have a tenor of 364 days and will bear interest at 4% per annum. The January 2026 new notes will have a tenor of 18 months and will bear interest at 7 1/8% per annum. The December 2025 new notes will have a tenor of 29 months and will bear interest at 6.95% per annum.

The main purpose of the exchange offer is to extend the company’s debt maturity profile and improve its cash flow management.

Consent solicitation

Powerlong is soliciting consents from noteholders to some proposed amendments to the indentures governing the following series:

• $500 million outstanding 6Ľ% senior notes due 2024 (ISIN: XS2213954766) (“2024 notes”);

• $535 million outstanding 5.95% senior notes due 2025 (ISIN: XS2250030090) (“2025 notes”); and

• $200 million outstanding 4.9% senior notes due 2026 (ISIN: XS2341882913) (“2026 notes”).

The primary purpose of the consent solicitation is to amend the events of default provision in the indentures to carve out any default or event of default with respect to each series that may be caused by certain default or event of default, judgment for money or order for relief, involuntary insolvency proceedings or appointment of receiver with respect to or arising as a result of the July 2019 notes and certain private senior notes.

The company is offering a consent fee of $2.50 per $1,000 principal amount.

Payment of the consent fee is conditioned on the company receiving consents from holders of a majority in principal amount of the outstanding notes of each series.

Concurrent consent bid

Concurrently, Powerlong is also soliciting consents from holders of the following notes:

• $169,770,700 outstanding 4% senior notes due 2023 (ISIN: XS2500700633) (“July 2022 A notes”); and

• $247.51 million outstanding 7 1/8% senior notes due 2024 (ISIN: XS2500700716) (“July 2022 B notes”), excluding $2.09 million principal amount held by the company’s affiliates.

The company is seeking consents to a proposed waiver and amendment to the indentures governing the notes. Specifically, the company is proposing to do the following:

• Extend the final maturity date under each indenture;

• Add provisions for deferred upfront payment and mandatory redemption in the note indentures; and

• Amend the definition of excluded notes in the indentures to carve out any default or event of default in respect of each series of as a result of (i) a default or event of default occurring under the July 2019 notes and certain private notes, or any default resulting from that; (ii) any final judgment for the payment of money or order for relief rendered against the company in relation to the July 2019 notes and certain private notes; (iii) involuntary insolvency proceedings commenced against the company with respect to or based on the July 2019 notes and certain private notes; or (iv) any consent from the company to appoint a receiver for all or substantially all of its properties or undertake similar actions to defend against any remedy holders of the July 2019 notes and certain private notes may exercise.

The company is offering a consent fee of $2.50 per $1,000 principal amount.

Payment of the consent fee is conditioned on the company receiving consents from holders of at least 75% in principal amount of the outstanding notes of each series.

Conditions

The exchange offer, the three-series consent solicitation and the concurrent two-series consent solicitation are not inter-conditional.

In addition, under each group of consent solicitations, the consent solicitation for each series is an independent solicitation and not conditional upon the consummation of the consent solicitation in respect of any other series.

Upon completion of the exchange offer, the new notes to be issued in exchange for the July 2021 notes will be a further issue under the July 2022 A notes indenture and will be consolidated and form a single series with the July 2022 A notes, and the new notes to be issued in exchange for the November 2019 notes will be a further issue under the July 2022 B notes indenture and will be consolidated and form a single series with the July 2022 B notes.

Instructions in connection with the exchange offer are irrevocable.

The minimum acceptance amount of the July 2019 notes represents 90% of the outstanding principal amount. The company said it may accept less than the minimum or none of the exchange notes tendered at its discretion.

Deferred upfront payment

Assuming the concurrent consent solicitation is completed,

• The terms of the July 2024 new notes will be amended, and immediately upon issuance the July 2024 new notes will be redeemed and marked down by 2% in principal amount outstanding at that time, and holders will be entitled to a deferred upfront payment equivalent to that 2%, together with accrued interest, payable on Aug. 4;

• The terms of the January 2026 new notes will be amended, and immediately upon issuance the January 2026 new notes will be redeemed and marked down by 2% in principal amount outstanding at that time, and holders will be entitled to a deferred upfront payment equivalent to that 2%, together with accrued interest, payable on March 6, 2024; and

• Holders of the December 2025 new notes will be entitled to a deferred upfront payment equivalent to 3% in principal amount of the July 2019 notes exchanged into the December 2025 new notes, payable on Oct. 6.

Background

Powerlong said that negative onshore events and austerity policies have caused offshore capital markets to react negatively, which has limited its funding sources to address upcoming maturities.

Against a backdrop of adverse market conditions in 2022, the company anticipates that the market condition in the real estate sector will remain under pressure in 2023.

The company said it is trying to meet its financial commitments by using existing financial resources and conducting some liability management exercises. The company had conducted a similar exchange offer and consent solicitation for its senior notes in July 2022 and is now pursuing the current exchange offer and consent solicitations.

The company noted that each of the participating holders under the exchange offer and consent solicitation will be deemed to have accepted and executed a support agreement.

Deadlines

The exchange offer will expire at 11 a.m. ET on July 4.

Settlement will occur on July 6.

Listing of the new notes on the Singapore Exchange will be on July 7.

Both sets of consent solicitations will also expire at 11 a.m. ET on July 4.

Payment of the consent fee is expected to be made on July 6.

Haitong International Securities Co. Ltd. (+852 2840 1680) is the solicitation agent.

Morrow Sodali Ltd. (+44 20 4513 6933, +852 2319 4130; powerlong@investor.morrowsodali.com; https://projects.morrowsodali.com/powerlongconsent; https://projects.morrowsodali.com/powerlongexchange) is the information, exchange and tabulation agent.

The real estate company is based in Hong Kong.

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