Sino-Ocean sets third meeting for holders of corporate bonds

By Marisa Wong

Los Angeles, Aug. 22 – Sino-Ocean Group Holding Ltd. issued an update on Tuesday relating to the bonds issued by subsidiary Sino-Ocean Holding Group (China) Ltd. (“SOG China”).

A third meeting of bondholders will be convened from Aug. 28 to Aug. 30.

The purpose of the third meeting is to consider the following matters:

• Amending the rules of bondholder meetings so that meetings will require notice of at least three working days instead of 10 working days; and

• Adjusting the arrangement for the repayment of principal and interest of the corporate bonds and the provision of credit enhancement measures and adding the terms of a grace period for the repayment of principal and interest.

Proposal details

While SOG China has tried to raise funds and improve its operations with its best effort to ensure payment of principal and interest for the corporate bonds, significant improvements to its liquidity could not be achieved in the short term.

Based on SOG China’s current estimates on its cash flow configuration, the subsidiary does not expect it will be able to settle the principal amount of the bonds in full within the 30-day grace period, and the following plan represents the maximum extent of its ability to settle payment.

In order to push forward the repayment of principal and interest of the bonds, the company is seeking consent of the bondholders to further adjust the arrangement for the repayment of principal and interest in the following ways, while the company starts to add credit enhancement and protection measures for the repayment of the bonds as set out below.

Repayment of principal

The balance of the principal amounts to RMB 2 billion as of Aug. 22.

In accordance with the covenants on the repayment date of the bonds as specified in their prospectus for public offering, the repayment date is Aug. 2, 2023.

As previously reported, SOG China convened the second meeting of bondholders from July 31 to Aug. 1. Holders granted a grace period of 30 consecutive calendar days, which extended the repayment date to Sept. 1, 2023.

If approved at the third meeting, the principal repayment period will be adjusted to 12 months from Aug. 2, 2023.

SOG China will repay the principal of the bonds during the repayment date adjustment period after the resolutions are passed with the following arrangements:

•10% of the principal, or RMB 200 million, to be repaid on Sept. 2, 2023;

• 5% of the principal, or RMB 100 million, to be repaid on the second day of each of the months in October, November and December 2023 and February and May 2024, i.e. a total of 25% of the principal, or RMB 500 million, will be repaid accordingly; and

• The remaining 65% of the principal, or RMB 1.3 billion, will be repaid on Aug. 2, 2024.

Repayment of interest

In accordance with the covenants on the interest accrual period and interest payment dates as specified in the prospectus for the bonds, the interest accrual period is from Aug. 2, 2018 to Aug. 1, 2023, and the interest payment date for the bonds is Aug. 2 of each year during the interest accrual period.

SOG China has repaid the accrued interest for the period from Aug. 2, 2022 to Aug. 1, 2023 in one lump sum on Aug. 2, 2023.

If approved at the third meeting of bondholders, the interest payment dates of the bonds will be Sept. 2, 2023, Oct. 2, 2023, Nov. 2, 2023, Dec. 2, 2023, Feb. 2, 2024, May 2, 2024 and Aug. 2, 2024.

The current coupon rate of the bonds during the repayment date adjustment period remains unchanged at 4% per annum, and the additional interest is still accrued on the basis of the then balance of the principal amount of bonds to be settled.

Specifically, as for the interest incurred on the bonds for the period from Aug. 2, 2023 to Aug. 1, 2024, SOG China will pay on each repayment date the interest incurred from Aug. 2, 2023 to that repayment date on the principal repayable on that repayment date.

Credit enhancement, protection

If approved at the third meeting of bondholders, SOG China will provide a pledge guarantee for the bonds with the revenue rights attached to 50% equity interest in Beijing Yuanxin Real Estate Development Co., Ltd. and sign legally valid credit enhancement documents and contracts by Oct. 31.

These credit enhancement measures will apply to the aggregate of the sum of all unsettled principal and interest and default payment (if applicable) under the bonds, and the scope of the guarantee will cover the principal and interest as well as default interest, indemnity, default payment, handling charge, damages and all costs incidental to the realization of rights over the debts and the guarantee arising from the default (if any) of and payable by SOG China.

The term of guarantee will last until the date on which the payment obligations under the bonds are settled in full or the date on which the rights over the pledge under the pledge guarantee contract have been realized in full by the holders of the bonds.

Beijing Yuanxin, established June 2014, has a registered capital of RMB 100 million and a paid-up capital of RMB 100 million. Beijing Yuanxin is principally engaged in real estate development and operation, construction engineering prospecting and construction engineering design. It is mainly responsible for the construction, development and operation of Beijing Grand Canal Place, an international commercial complex project located in Tongzhou District in Beijing.

If the aforementioned resolutions on adjusting the arrangement for the repayment of principal and interest of the bonds and the provision of credit enhancement measures are considered and approved at the third bondholders meeting, those resolutions will be legally binding on all holders of the bonds from the date of consideration and approval of those resolutions, and the arrangement for the repayment of principal and interest will be adjusted accordingly with the addition of the credit enhancement and protection measures, while the relevant covenants in the relevant public offering documents will no longer be applicable.

Such adjustment of repayment plan does not constitute an event of default under the bonds, the company noted.

Grace period

SOG China is proposing to add terms of a grace period for the repayment of principal and interest of the bonds.

In view of current operating conditions and in order to push forward the repayment of principal and interest of the bonds, the company is seeking bondholder consent for a grace period of 15 consecutive calendar days to be granted to the repayment dates of the principal and interest due on the bonds.

If SOG China makes full repayment of the principal and interest or obtains relevant waivers from meetings of the bondholders within that 15-day grace period, it will not constitute a default in respect of the bonds.

Trading of the bonds was suspended from the Shanghai Stock Exchange on Aug. 2, as previously reported.

The property developer is based in Hong Kong.

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