20220621-招银国际-GZRFPR__The_consent_solicitation_and_scheme_4页_579kb

CMBI Credit Commentary Summary - GZFFR

Core Content

This document provides a detailed analysis of the debt restructuring options available to holders of GZRFPR USD bonds, focusing on the consent solicitation and scheme proposals. The restructuring aims to consolidate 10 outstanding USD bonds into three tranches (Group A, B, and C) with extended maturities and adjusted coupon rates. The analysis also evaluates the current market valuation of these bonds, the potential cash inflows, and the implications of each restructuring option.

Key Information

• Restructuring Proposal: GZRF proposes to collapse 10 USD bonds into 3 tranches (Group A, B, and C) with maturities extended by 3-4 years and coupon rates adjusted to 6.5% in cash / 7.5% in PIK for the first 18 months.
• Consent vs. Scheme: If the consent is not secured, the scheme will be implemented, which involves collapsing all 10 USD bonds into one tranche with a maturity extension of 6 years and a lower coupon rate of 5.5% in cash / 6.5% in PIK.
• Consent Details:
  • Consent Fee: 0.5% of the principal amount
  • Consent Expiry Date: 7 July 2022
  • RSA Expiry Date: 8 July 2022
  • Approval Threshold: 75% of holders in principal amount at the Extraordinary General Meeting (EGM), with a 66% meeting quorum for each of the 10 USD bonds
  • Specified Assets: Princess Cove in Malaysia and One Nine Elms in London, with an estimated net asset value of cUSD800mn or 16% of the total outstanding amount of new bonds

Main Points

• Valuation Analysis: The current valuation of GZFFRs is at 20ish, indicating a deep discount and pricing in limited cash inflows over the next 18 months, as well as execution risks.
• Cash Inflow: Holders may receive 0.5 points per USD100 of consent fee, but this is expected to be limited unless GZRF successfully disposes of the specified assets.
• Amortization Timetable:
  • The consent offers a slower redemption timetable for Group A and B compared to the scheme, but faster for Group C.
  • The scheme, if implemented, would result in higher redemption percentages at earlier months.
• Coupon Rate: The consent offers a higher coupon rate (6.5% in cash / 7.5% in PIK) than the scheme (5.5% in cash / 6.5% in PIK), which could be a key factor in influencing holder preferences.
• NPV Estimates: A range of discount rates (15% to 50%) was used to estimate the net present value (NPV) of the bonds, highlighting the significant risk of scheduled redemption not being honored.

Key Takeaways

• The consent and scheme are the two primary options for restructuring, with the consent being more favorable for bondholders due to the higher coupon rates and more gradual redemption.
• The success of the consent hinges on the preference of 2024 bondholders, who may be more inclined to accept the scheme if the consent is not secured.
• Asset Disposal: GZRF’s priority is to develop the specified assets rather than immediately divest them, which could affect the cash inflow for bondholders.
• Risk and Uncertainty: The current valuation reflects high risk and limited cash inflow, with the possibility of non-honoring scheduled redemptions.
• Legal and Regulatory Notes: The document includes important disclosures and disclaimers, emphasizing the risks involved and the non-guaranteed nature of the information and outcomes.

Summary Table

Conclusion

The restructuring of GZRFPR USD bonds is a critical event for investors, with the consent offering more favorable terms than the scheme. However, the success of the consent depends on the support of 2024 bondholders, who may prefer the scheme due to its potentially more aggressive redemption schedule. Investors are advised to carefully evaluate the options and consider the risk of non-honoring redemptions and limited cash inflows.