China Evergrande announces hearings on convening scheme meetings

By Wendy Van Sickle

Columbus, Ohio, July 17 – China Evergrande Group announced the dates of hearings relating to schemes of arrangement proposed to be implemented in Hong Kong and in the Cayman Islands in a pair of notices on Monday.

The High Court of the Hong Kong Special Administrative Region will have a hearing at 11:30 p.m. ET on July 23 on two proposed scheme meetings for class A and class C debts.

Regarding the scheme of arrangement proposed to be implemented in the Cayman Islands, a convening hearing seeking to convene two scheme meetings for class A and class C debt will be heard before the Grand Court of the Cayman Islands at 11 a.m. ET on July 25.

A convening hearing for the Scenery Journey Ltd. scheme at which orders will be heard before the High Court of Justice, Eastern Caribbean Supreme Court at 10 a.m. ET on July 24.

A convening hearing for the Tianji Holding Ltd. scheme at which orders will be sought to convene a single scheme meeting of these creditors will be heard before the High Court of the Hong Kong Special Administrative Region at 11:30 p.m. ET on July 23.

The information agent is Morrow Sodali Ltd. (evergrande@investor.morrowsodali.com).

In each case, if the court makes orders permitting the convening of the relevant scheme meetings, detail of those meetings will be set out in a notice.

Questions may be directed to the company’s financial adviser Houlihan Lokey (China) Ltd. (Evergrande@HL.com).

Background

China Evergrande signed three term sheets on March 20 relating to the senior secured notes in the aggregate principal amount of $13,922,500,000 issued by China Evergrande and the dollar-denominated senior notes in the aggregate principal amount of $5,226,000,000 issued by Scenery Journey and guaranteed by, among others, Tianji Holding.

On April 3, the company and the ad hoc group representing over 20% of China Evergrande notes and 35% of Scenery Journey notes entered into three restructuring support agreements.

The company announced that as of April 27, holders of more than 77% of the outstanding principal amount of the class A debts had submitted letters to accede to the class A RSA; creditors holding more than 30% of the outstanding principal amount of the class C debts had submitted letters to accede to the class C RSA; holders holding more than 91% of the outstanding principal amount of the existing Scenery Journey notes had submitted letters to accede to the Scenery Journey RSA; and creditors holding more than 64% of the outstanding principal amount of the Tianji existing debt instruments had submitted letters to accede to the Tianji RSA.

The company also announced that because some creditors required additional time to complete their internal processes of acceding to the relevant RSAs, at their request and suggestion, the consent fee deadline had been extended to 5 a.m. ET on May 18 from 5 a.m. ET on April 27.

Each creditor who executed or acceded to the relevant RSA by the consent fee deadline was to receive a consent fee in the amount of 0.25% of the outstanding principal amount of debts held by it at the voting record time. The consent fee will be paid with payment-in-kind new notes.

Holders of the existing Scenery Journey notes, being the scheme creditors of the Scenery Journey scheme and Tianji scheme, were encouraged to participate and accede to the Scenery Journey RSA and Tianji RSA as the effectiveness of the Scenery Journey scheme and Tianji scheme are interdependent.

China Evergrande schemes

Under the China Evergrande scheme, the debt would be grouped into two classes.

Class A debts consist of 10 series of U.S. dollar-denominated senior secured notes, one series of Hong Kong dollar-denominated convertible bonds and one private loan.

Class C debts consist of debts including private loans, repurchase obligations and guarantees provided by the company in relation to certain offshore and onshore debts.

Creditors from either class may opt for one of two options.

The first option gives creditors new notes with a tenor of 10 to 12 years.

The second option allows creditors to convert their entitlements into new notes to be issued by the company with a tenor of five to nine years; a package of rights and instruments consisting of mandatory exchangeable bonds to be issued by the company exchangeable into shares in Evergrande Property Services Group Ltd., mandatory exchangeable bonds to be issued by the company exchangeable into shares in China Evergrande New Energy Vehicle Group Ltd. and mandatory convertible bonds to be issued by the company and security-linked notes to be issued by the company; or a combination of the notes and the rights package and instruments.

Class A creditors’ entitlements to distribution will be on a full accrued claim basis.

Class C creditors’ entitlements to distribution will be on a deficiency claim basis, which means the full accrued claim minus the assessed value of any related rights which are against any party that is not China Evergrande Group.

Scenery Journey scheme

Scenery Journey plans to implement a restructuring through a scheme of arrangement in the British Virgin Islands.

The creditors consist of holders of four series of U.S. dollar-denominated senior notes issued by Scenery Journey.

The creditors’ entitlement to distribution will be on the deficiency claim basis, like the class C creditors above.

Under the proposed scheme, each creditor will be allocated a pro rata portion of the new notes to be issued by Scenery Journey in an aggregate principal amount of $6.5 billion, based on the creditors’ entitlement.

Tianji scheme

Tianji plans to restructure its debt in a scheme of arrangement in Hong Kong.

The Tianji debts consist of guarantee obligations under the Scenery notes and certain other financial debt as set out in the term sheet.

Creditor entitlements will again be on the deficiency claim basis.

Each creditor will be allocated a pro rata portion of $800 million principal amount new Tianji notes.

The real estate development company is based in Shenzhen, China.

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