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Central China Real Estate Limited - Exchange and Consent Offer - Clarification

CLARIFICATION ON THE EXCHANGE OFFER AND/OR CONSENT SOLICITATION IN RELATION TO THE FOLLOWING SECURITIES


13 APRIL 2023


Full announcement including disclosures and disclaimers, available via SGX


"Reference is made to the announcement of the Company dated April 3, 2023 (the “Announcement”) and the Exchange Offer and Consent Solicitation Memorandum dated April 3, 2023 (the “Exchange Offer and Consent Solicitation Memorandum”) in relation to the Exchange Offer and Consent Solicitation. Capitalized terms used in this announcement shall have the same meaning ascribed to them in the Announcement and the Exchange Offer and Consent Solicitation Memorandum.


The Company would like to highlight that in its effort to ensure fair treatment of holders of the proposed New Notes, given the proposed New Notes to be issued under the Exchange Offer (subject to its consummation) will have later maturities than the January 2020 Notes, the August 2020 Notes, the November 2020 Notes and the January 2021 Notes, it has already included under the proposed terms of each series of New Notes a requirement for the Company (a) to conduct a publicly announced cash tender offer in respect of such New Notes, or (b) to redeem such New Notes on a pro rata basis, within 60 days after the occurrence of certain repayment events under the January 2020 Notes, the August 2020 Notes, the November 2020 Notes and the January 2021 Notes. Eligible Holders should refer to the provision “Mandatory Redemption Upon a Notes Repayment Event” under the sections headed “Description of the April 2025 Notes”, “Description of the August 2025 Notes” and “Description of the November 2025 Notes” in the Exchange Offer and Consent Solicitation Memorandum for further information.


The Company believes that the repayment terms under the proposed New Notes, including the provision “Mandatory Redemption on Specified Dates” relating to the scheduled early repayments of the New Notes, and the provision “Mandatory Redemption Upon a Notes Repayment Event” mentioned above, would provide equitable treatment and protection to Eligible Holders who participate in the Exchange Offer. The Company would encourage Eligible Holders who have not yet tendered their Exchange Notes to do so under the Exchange Offer as soon as possible."

 

EXCHANGE OFFER AND CONSENT SOLICITATION IN RELATION TO THE FOLLOWING SECURITIES


03 APRIL 2023


Full announcement including disclosures and disclaimers, available via SGX




...


"INTRODUCTION


On the date of this announcement, Central China Real Estate Limited, a company incorporated in the Cayman Islands with limited liability (the “Company”) commenced the offer (the “Exchange Offer”) to exchange in respect of (A) at least US$270,000,000, or 90%, of the aggregate outstanding principal amount of the April 2019 Notes (the “April 2019 Notes Minimum Acceptance Amount”), (B) at least US$177,570,000, or 90%, of the aggregate outstanding principal amount of the November 2019 Notes (the “November 2019 Notes Minimum Acceptance Amount”) and (C) at least US$360,000,000, or 90%, of the outstanding principal amount of the June 2020 Notes (the “June 2020 Notes Minimum Acceptance Amount” and, together with the April 2019 Notes Minimum Acceptance Amount and the November 2019 Notes Minimum Acceptance Amount, the “Minimum Acceptance Amount”) held by Eligible Holders for the Exchange and Consent Consideration (as defined below), and the solicitation of consents from Eligible Holders to approve certain proposed waivers and amendments to the indentures governing the November 2019 Notes and the June 2020 Notes upon the terms and subject to the conditions (the “Consent Solicitation” and, together with the Exchange Offer, the “Exchange Offer and Consent Solicitation”) set forth in the Exchange Offer and Consent Solicitation Memorandum. The purpose of the Exchange Offer and Consent Solicitation is to improve the Company’s overall financial condition, extend its debt maturity profile, strengthen its balance sheet and improve cash flow management.


The Company is also concurrently soliciting consents from the Holders of the Consent Notes to certain proposed amendments to each of the Consent Notes Indentures, upon the terms and subject to the conditions set forth in the Consent Solicitation Statement. The principal purpose of the Concurrent Consent Solicitation is to amend the events of default provision in the Consent Notes Indentures to carve out any default or event of default in respect of the Consent Notes as a result of a default or event of default occurring under the Exchange Notes, and to amend other related changes and make certain other updates, in accordance with the terms and subject to the conditions set forth in the Consent Solicitation Statement.


Unless otherwise defined, capitalized terms in this announcement will have the same meaning as those defined in the Exchange Offer and Consent Solicitation Memorandum and the Consent Solicitation Statement.


Consummation of the Exchange Offer and Consent Solicitation is subject to important conditions as further set forth below and in the Exchange Offer and Consent Solicitation Memorandum."


...


"BACKGROUND AND PURPOSE


During the second half of 2021, Chinese property developers and the capital markets that have funded growth and development of the sector have experienced an inflection point.


Reduced bank lending for real estate development has adversely affected access by property developers to onshore capital. Buyers’ concerns about the ability of property developers to deliver projects has adversely affected property sales. In addition, the use of pre-sale proceeds is also restricted under the applicable PRC policies. Driven by these negative onshore events and austerity policies, offshore capital markets have reacted negatively, which limited the Company’s funding sources to address upcoming maturities.


The property sector in China has continued to experience volatility in 2022. Further tightened bank lending, coupled with certain negative credit events, has intensified market concerns over the operations of Chinese property developers.


As a result, pre-sales of Chinese property developers have generally decreased. In light of the foregoing, the revenue and gross profit of the Company in 2022 have decreased as compared to the corresponding period in 2021. The Company’s cash and bank balances as of December 31, 2022 also decreased as compared to December 31, 2021. Against the backdrop of the adverse market conditions and recurrences of the COVID-19 outbreaks, the Company anticipates that the market condition in the real estate sector will remain under pressure in 2023.


On July 21, 2022, Henan Railway Construction & Investment Group Co., Ltd. (河南鐵路 建設投資集團) (“Henan Railway”), an enterprise wholly owned by the Henan Provincial People’s government, acquired the Company’s shares through its wholly-owned subsidiary, Henan Tongsheng Real Estate Co., Ltd. (河南同晟置業有限公司) (“Henan Tongsheng”) and became the second largest shareholder of the Company. In the future, the Company and Henan Railway intend to integrate their respective brands and competitive advantages in their respective industries to achieve synergistic integration, complementary advantages and winwin cooperation in multiple fields.


The Company is committed to mitigating the effects of the recent adverse market conditions and is striving to meet its financial commitments by prudently utilizing its existing financial resources. As part of these efforts, the Company is conducting the Exchange Offer and Consent Solicitation and the Concurrent Consent Solicitation. Given the April 2019 Notes will mature prior to the Settlement Date, the Company is also seeking a waiver for any potential Default or Event of Default under the November 2019 Notes and the June 2020 Notes which may occur as a result of non-payment of the April 2019 Notes under the Proposed Waivers.


The Concurrent Consent Solicitation is expected to settle before the April 2019 Notes mature. The Company believes the Exchange Offer and Consent Solicitation and the Concurrent Consent Solicitation will improve its overall financial condition, extend its debt maturity profile, strengthen its balance sheet and improve cash flow management, which would be in the interest of all its stakeholders, including the holders of the Exchange Notes and the Consent Notes.


If either the Exchange Offer and Consent Solicitation or the Concurrent Consent Solicitation are not successfully consummated, the Company will not be able to fully repay the Exchange Notes and/or Consent Notes, and its other efforts to meet its financial commitments may not achieve the desired effect. Even after consummation of the Exchange Offer and Consent Solicitation, the Company may not be able to make payments due on any outstanding Exchange Notes or any other outstanding indebtedness. As such, the Company may have to consider an alternative debt restructuring exercise."

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