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E-House (China) Enterprise Holdings Limited - Scheme - Information

Updated: Apr 4, 2023

INVITATION FOR IRREVOCABLE RESTRUCTURING SUPPORT

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(1) RESTRUCTURING SUPPORT AGREEMENT (CB)

(2) DISCLOSEABLE AND CONNECTED TRANSACTION – THE TM HOME SHARE ISSUANCE

(3) NEW BUSINESS COOPERATION AGREEMENT


03 APRIL 2023


Full announcement(s) including disclosures and disclaimers, available via hkex1 and hkex2 and E-House



"INVITATION FOR IRREVOCABLE RESTRUCTURING SUPPORT


Overview


The Company intends to propose the New Schemes to holders of the Old Notes and the holder of the Convertible Note. If each of the New Schemes are sanctioned by the relevant court and become effective, on the Restructuring Effective Date, the Company will pay the Restructuring Consideration to the participating Scheme Creditors, consisting (i) US$60 per US$1,000 (or the HK$ equivalent) of the Scheme Creditor Claim held by each Scheme Creditor at the Record Time,

payable in cash; (ii) In the case of a Scheme Creditor that is a holder of the Old Notes, shares in Creditor SPV (defined below) issued pro rata by reference to the Scheme Creditor Claim that each such Scheme Creditor held at the Record Time as a proportion to the Scheme Creditors’ Claims of such Scheme Creditors; and (iii) on the Restructuring Effective Date, the Company will cause TM Home to issue a number of new shares of TM Home to Creditor SPV and the CB Shareholder, pro rata by reference to the proportion of the aggregate Scheme Creditor’s Claims held by the holders

of the Old Notes and the holder of the Convertible Note, respectively, at the Record Time, such that after such issuance, an aggregate 65% equity interest in the share capital of TM Home will be held collectively by Creditor SPV, the CB Shareholder and the TM Home Minority Shareholder.


The Company intends to fund the cash consideration under the restructuring plan with external financing, including, but not limited to, raising approximately HK$480 million by way of a potential rights issue which is expected to be underwritten by Mr. Zhou Xin.


The overall principle of the Restructuring is to give the Scheme Creditors a combination of cash and a controlling equity interest in TM Home, an entity that will, upon completion of the Restructuring, (a) hold and operate the Company’s two stable lines of business, being (i) real estate data and consulting services business currently operated under CRIC Holdings Limited and (ii) hold and operate the online real estate marketing service business in partnership with Tmall

Network, and (b) holds a controlling stake in Leju Holdings Ltd. (NYSE: LEJU), a subsidiary of the Company. TM Home will not operate or hold the Company’s real estate brokerage network services conducted under the “Fangyou” brand name."


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"Background and Purpose of the Invitation for Irrevocable Restructuring Support


We mainly offer real estate agency services in the primary market, real estate data and consulting services and real estate brokerage network services. We serve real estate developers, buyers, brokerage firms and other industry participants, covering various aspects of the real estate value chain. Since mid-2021, sales for residential property in China slowed significantly and prices for residential units suffered a substantial reduction. In the same period, a number of high-profile Chinese property developers, including some of our customers, began to experience difficulties in securing external financing from PRC banks as well as the onshore and offshore capital markets.


Many companies in the Chinese property sector, including our Company, have been negatively affected by this downturn in different respects:


• Difficulty raising onshore and offshore financing: Many companies within the real estate sector, including those providing services to real estate developers and consumers such as our Company, have been unable to access typical financing channels, such as bank lending and capital markets for equity and debt. This has created significant pressure on our short-term liquidity. Reduced bank lending for companies in the real estate sector has resulted in reduced access by these companies to onshore capital. Adverse reaction to these onshore events by offshore capital markets has limited our funding sources to address upcoming maturities on our outstanding indebtedness. In addition, in 2021, we have been assigned a rating of “BB-” with a negative outlook by S&P Global Ratings and “BB+” with a negative outlook by Lianhe Global. In March 2022, we have asked these rating agencies to withdraw their credit ratings of us. The offshore bond market, on which we rely heavily for refinancing and growth capital, is effectively closed to privately owned companies in the Chinese property sector. The difficulty faced by us in raising onshore and offshore financing has significantly exacerbated our current liquidity pressures.


• Decreased cash flows and liquidity in a deteriorating market: In 2022, our loss for the year amounted to RMB4,968.5 million (US$722.6 million), compared to profit for the year of RMB9,374.5 million in 2021. This was mainly due to (i) the decline in our business scale as a result of the downturn in the overall real estate market; (ii) the additional loss allowance for the expected credit loss on outstanding trade-related receivables from customers that we recognized due to the deterioration in the credit quality of several real estate developer customers; and (iii) impairment losses on other assets resulting from the overall real estate market downturn. Further, the general deterioration of the PRC property market has affected our revenue and cash flow as we are dependent primarily on PRC property developers paying the fees for our services. The general downturn of the PRC property market and the cash flow difficulties faced by various high-profile PRC property developers have in turn materially and adversely impacted our ability to generate sufficient cash to service our debt in a timely manner and sustain our operations.


• Tightening of supervision of financing activities and cash balances: Furthermore, there has been significant tightening of supervision of our cash balances by onshore and offshore banks which significantly reduced our unrestricted cash. We have been subject to significant restrictions on our cash deployment. The tightening of supervision has significantly

constrained our ability to remit cash offshore. Since the fourth quarter of 2021, many of our creditors, whether onshore or offshore, have also required us to enhance the security or provide cash deposit as a condition to maintain or extend the credit provided to us. These measures have drastically reduced the amount of cash freely deployable by us for servicing our financial and other obligations.


As of the date of this announcement, our outstanding offshore indebtedness consists of the following:


• US$200,000,000 7.625% senior notes due 2022 (ISIN: XS2066636429, Common Code: 206663642) we issued on October 18, 2019, and the additional US$100,000,000 7.625% senior notes due 2022 we issued on August 14, 2020, which have been consolidated and form a single class with the US$200,000,000 7.625% senior notes due 2022 issued on October 18, 2019, with principal of approximately US$298,200,000 outstanding;


• US$200,000,000 7.60% senior notes due 2023 (ISIN: XS2260179762, Common Code: 226017976) we issued on December 10, 2020, and the additional US$100,000,000 7.60% senior notes due 2023 we issued on June 11, 2021, which have been consolidated and form a single class with the US$200,000,000 7.60% senior notes due 2023 issued on December 10, 2020, with principal of approximately US$300,000,000 outstanding; and


• HK$1,031,900,000 2.0% convertible note due 2023 we issued on November 4, 2020, to Alibaba.com Hong Kong Limited, with principal of approximately HK$1,031,900,000 outstanding.


As part of our efforts to meet our financial commitments, we are conducting this Invitation for Irrevocable Restructuring Support to provide increased flexibility to our operations, alleviate our cashflow pressure, waive certain restrictions under the Old Notes Indentures in order to implement the Restructuring and manage our default risk.


We intend to communicate actively with our other creditors to address our liquidity issues consensually and amicably and within a reasonable timeframe. In the meantime, we will continue to prioritize the stabilization of our operations with a view to preserve our revenue and cash generation."

 

1) RESTRUCTURING

SUPPORT AGREEMENT (CB)

(2) DISCLOSEABLE AND CONNECTED TRANSACTION –

THE TM HOME SHARE ISSUANCE

(3) NEW BUSINESS COOPERATION AGREEMENT



"OVERVIEW


Reference is made to the announcement of the Company dated 3 February 2023 (the “Announcement”) in relation to, among other things, the recent developments under the Prior Scheme.


Reference is also made to the Note Instrument dated 4 November 2020, in relation to the Convertible Note, entered into by the Company for the benefit of the CB Holder as the Noteholder (as defined in the Note Instrument). The Company has been in active discussions with its advisers with the intention to formulate a restructuring plan that appropriately takes into consideration the positions of all stakeholders. As a result and in order to restructure the Company’s debt obligations, including the Old Notes and the Convertible Note, the Company proposes to implement the NewSchemes."

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