Corestate hosts meeting for looming likely convertible bond default

Chicago, Nov. 11 – Corestate Capital Holding SA is hosting a bondholder meeting regarding the upcoming maturity of its €200 million 1.375% convertible bonds and the likely event of a default, according to a notice.

Corestate says in the notice that it will not be able to repay the convertible bond when it matures, citing such a payment as “not possible.”

The company intends a comprehensive restructuring of its liabilities, including the convertible bond.

A meeting will be held at 4 a.m. ET on Nov. 28 (the maturity date of the bonds) in Luxembourg.

Bondholders representing at least half of the notes must be present and vote on the restructuring plan. Proxies may be appointed for bondholders who cannot attend in person.

The issuer has a second convertible bond for €300 million outstanding, which matures on April 15, 2023 (ISIN: DE000A19YDA9). Repayment on this bond is also not possible.

Corestate has been working with an ad hoc committee since May.

The ad hoc committee has proposed an alternative restructuring plan.

The main proposal is for the provision of new money through a share capital increase. Investors have signed commitment letters to provide €45 million in exchange for 45,979,831 shares of the company and €30 million for the issuance of 300 convertible bearer notes with mandatory conversion.

The 4.5% mandatory convertibles will have a five-year term and will mature in January 2028.

Interest would be deferred until the notes are converted at a conversion price of €0.40 per share. The notes would be subordinated.

Additionally, the company envisages reducing the existing debt of the convertible bonds to an amount of €100 million on a pro rata basis over the two notes.

Interest would be waived, but the interest rate would increase to 4.5%, payable annually.

There would be a PIK toggle option for the first year.

The bonds would have a five-year tenor.

Alternative restructuring plan

If the main proposal is not approved, the existing convertibles would be reduced and replaced with new OpCo notes to be issued by Corestate Capital Group GmBH.

The bonds would be listed in Luxembourg.

The existing bondholders would receive acquisition rights to acquire new shares of the issuer and new notes, exercisable for a certain period.

Certain holders of the existing bonds have agreed to subscribe to the new super senior notes to be issued by OpCo for €25 million.

The new super senior notes would be secured by a comprehensive security package.

Differences between the plans

The first plan is an equity raise and the second plan is the issuance of super senior debt.

The company, in the case of the second plan, would change corporate governance figures and appoint a chief restructuring adviser.

The degree of transaction security and predictability is stronger in the first case, the company thinks.

Third plan

A third plan is moving the maturity date of the November bonds to April and giving the company more time to reach an agreement with bondholders.

Details

Bondholders who cannot attend the meeting and wish to appoint a proxy should contact -R. Kai Gregor Klinger of Corestate Capital Group GmBH, a subsidiary of the issuer. There is a form at https://corestate-capital.com/en/nhm/.

Proxy instructions are due by Nov. 25.

Corestate is a Luxembourg-based real estate company.

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