20240215-招银国际-CMBI_Credit_Commentary__GZRF__The_missing_parts_of_consent_solicitation_and_exchange_offers_3页_535kb

Summary of GZRF ONE Nine Elms Sale Analysis

Key Details

• GZRF is selling the mixed-use ONE Nine Elms project to a SPV of Cheung Chung Kiu.
• The SPV will assume USD bonds totaling at least USD 800 million, exchanged for perps backed by project cash flows.

Implications for USDbondholders

• Uncertainty exists due to project delays and GZRF's tight liquidity, which may affect recovery rates if the project defaults.
• Sale price could be favorable or unfavorable; GZRF bonds trade at distressed YTM levels (6-7%), and approval may be challenging.
• Bondholders may need to decide optional participation in multiple tranches of perps, with potential terms differing across tranches.

Missing Information in Consent Solicitation

• Terms, structure, and ranking of perps, including mandatory vs. optional exchange participation.
• Cap on bond exchange amount, despite minimum USD 800 million disclosure.
• Project debt levels to assess residual value and completion risks, including impact on bond recovery.
• Ownership disclosure for Cheung and his family, affecting consent solicitation influence.

Approval Challenges

• Requires 75% bondholder approval by principal amount. Past sale in 2022 involved HKD 3,200/sqft valuation, compared to current deal c HKD 5,100/sqft.
• Low opportunity cost for bondholders given current bond prices; completion risks delay from Nov 2023 to Apr 2024.