Mega Wisdom adjourns noteholder meeting for want of quorum

Chicago, July 17 – Mega Wisdom Global Ltd. adjourned its noteholder meeting relating to the $497 million outstanding 6¼% secured notes due 2023 (ISIN: XS2342977324) guaranteed by Fortune Joy Ventures Ltd. and Sino-Ocean Capital Holding Ltd. to consent to some amendments and waivers relating to the notes.

The meeting was adjourned from July 17 due to lack of a quorum.

This is the second consent solicitation for the notes, with a repeated invitation for holders to consent to some amendments and waivers.

The new meeting will be held at Linklaters’ Hong Kong office at 5 a.m. ET on Aug. 1.

The deadline to vote is now 11 a.m. ET on July 27.

The amended effective date is expected to be Aug. 1.

Background

As a recap, since early 2022, Fortune Joy and its subsidiaries have experienced liquidity pressure due to adverse market conditions, which resulted in reduced operating cash inflow and limited access to external capital to refinance its existing debt. The group said it has been in active discussions with its creditors to address these challenges and has been striving to mitigate the impact from those adverse market conditions. However, despite these efforts to enhance its liquidity, there are uncertainties over debt refinancing and challenging operating and funding conditions, and consequently the group’s liquidity pressure persists. The company had painted a similar backdrop for its previous consent solicitation.

The company highlighted in a recent announcement that with this liquidity pressure, it foresaw difficulties in repaying the principal of the notes on or before June 29, which was the last day of the seven-day grace period for payment of principal on the notes, paying accrued interest for the period from and including Dec. 22, 2022 to but excluding June 22 on or before July 6, which was the last day of the 14-day grace period for the coupon payment.

As a result, events of default under the notes would occur if payments were not made by the end of the respective grace periods. This may also trigger cross-default provisions under the issuer’s and guarantors’ other existing debt.

New consent bid

Mega Wisdom is therefore soliciting consents from noteholders to the proposed amendments and waivers under an extraordinary resolution, which, if passed and implemented, will allow the group to improve its financial profile and liquidity position.

The proposals would become effective on a date after those non-payment events of default occur.

If approval from a required majority is not obtained at the meeting or any adjourned meeting, the issuer will not be able to implement the extraordinary resolution, and the issuer and guarantors may have to enter into immediate corporate restructuring.

If that occurs, noteholders may lose all or a substantial portion of their investments, the company warned.

If a quorum is not present at the scheduled meeting, the meeting will be adjourned.

Proposals

Some highlights of the proposed amendments and waivers include the following:

• Extending the maturity date of the notes to June 22, 2029 from June 22, 2023;

• Paying the accrued interest for the period from and including Dec. 22, 2022 to but excluding June 22, 2023 in cash on June 22, 2025;

• Changing interest payment frequency from semiannual to annual and the rate of interest from 6¼% to 5% for the interest periods from and including June 22, 2023;

• Including an option for the issuer to elect to pay PIK interest at 6% per annum in lieu of paying cash interest for the interest periods from and including June 22, 2023 to but excluding June 22, 2028;

• Including provisions that not less than 5% and 15%, respectively, of the aggregate principal amount of notes outstanding on the amendment effective date will have been redeemed or purchased and canceled by June 22, 2027 and June 22, 2028, respectively; and

• Adding a buyback and an optional call in whole or in part at par with 15 to 30 days’ notice.

The proposals also include, among other things, amendments to definitions of extraordinary resolution and some events of default.

In addition, the issuer is seeking consents to lower the threshold for definitions of written resolution and electronic consent to 75% from 90%.

These proposals are unchanged from the proposals under the previous consent solicitation.

Furthermore, the issuer wants to waive any default, event of default or potential event of default under the notes that may have occurred or may occur in connection with the proposed amendments and any default, event of default or potential event of default that may have occurred or continue by the amendment effective date, including non-payment of principal by June 29 and non-payment of interest by July 6.

Details

No consent fee is being offered.

The quorum required at the meeting was two or more persons holding or representing no less than three-quarters of the aggregate principal amount of notes outstanding. As the meeting has been adjourned, the quorum will drop down to two or more persons representing not less than one-quarter of the aggregate principal amount outstanding.

To pass, the extraordinary resolution required approval by two or more persons representing at least three-quarters of the principal amount outstanding or, as the meeting has been adjourned, one-quarter of the principal amount outstanding.

The quorum and required majority are unchanged from the previous consent solicitation.

Haitong International Securities Co. Ltd. (+852 2840 1680; project.starfish.iv.2023@htisec.com) is the solicitation agent.

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

Sino-Ocean is a property developer based in Beijing.

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