20230623-招银国际-PWRLNG_Another_round_of_liability_management_exercise_4页_518kb

PLEASEREADTHEAUTHORCERTIFICATIONANDIMPORTANTDISCLOSURESONLASTPAGEFixedIncomeCreditCommentary23June2023GlennKo,CFA高志和(852),CPA吳蒨瑩(852)王世超(852)@cmbicomhkTheAssetAsianG3BondBenchmarkReview2023WehopeyoufoundourcommentariesandideashelpfulWeseektoelevateoureffortsandvalue-addfurtherinthecomingyearWehighlyappreciateyoursupporttousinSell-SideAnalystsofthepollsof“TheAssetAsianG3BondBenchmarkReview2023”Thankyouforyoursupport!Furthermaturityextensionfor3bondscomingduePowerlongannouncedanotherroundofexchangeofferandconsentsolicitationonallofits8offshoreUSDbondswithatotalo/samountofUSD21bnInshort,thisaroundoflabilitymanagementistoextendthematurityPWRLNG69507/23/23for29months,aswellasfurtherthematuritiesof2exchangedbonds:PWRLNG407/14/23andPWRLNG7⅛01/15/24foranother1-yearand2-year,respectivelyRecalledthatPowerlongcompletedanexchangeofferandconsentsolicitationfor2bondsoriginallyduein2022andissuedPWRLNG407/14/23andPWRLNG712501/15/24inJul’22Comparingwithitspreviousexchangeoffer,thetermsofferedinthisroundarelessfavorable:(1)lowerincentivefee,(2)lowerupfrontprincipalrepaymentand(3)longermaturitiesextensionThatsaidthetermsproposedbyPowerlongarebetterthanthoseofdistressedpropertydeveloperssuchasSunacandEvergrandewhichseekforlongermaturityextension,offernoupfrontprincipalrepayment,cutthecouponandcouponcouldbeinPIKTheExchangeoffersTheexchangeofferscoverPWRLNG407/25/22andPWRLNG7⅛11/08/22(theholdoutsofthe2bondssubjecttoexchangeofferinJul’22),aswellasPWRLNG69507/23/23Theexchangeoffersaretoextendthematuritiesofthese3USDbondsto2024-26SeethetablebelowFortheholdoutsofthe2bondssubjecttoexchangeoffersinJul’22,the“effective”maturityextensionisinlinewithholdersoftheexchangedbonds(PWRLNG407/14/23andPWRLNG7⅛01/15/24),ie1-yearand2-year,fromJul’23toJul’24andJan’24toJan’26,respectivelyForPWRLNG69507/23/23whichisthefirsttimesubjecttoanexchangeoffer,theextensionis29-monthThecouponrateswillremainthesameandcouponwillbepayablesemi-annuallyThedeferredupfrontpaymentswillbe2-3ptsOnlytheexchangeofferofPWRLNG69507/23/23willbesubjecttoaminimumacceptancelevelof90%oftheprincipalamountofUSD420mnTheincentivefeefortheexchangeoffersis025ptanddeadlinefortheexchangeis4Jul’23CMBICreditCommentaryPWRLNG:Anotherroundofliabilitymanagementexercise 23 June2023 The consent solicitation The consent solicitation covers PWRLNG 6.25 08/10/24, PWRLNG 5.95 04/30/25 and PWRLNG 4.9 05/13/26. The consent solicitation is to carve out any event of default resulting from the default PWRLNG 6.95 07/23/23. The approval threshold is 50%. The consent fee is 0.25pt and deadline is 4 Jul’23. The concurrent consent solicitation The concurrent consent solicitation covers PWRLNG 4 07/14/23 and PWRLNG 7.125 01/15/24. It aims to further extend maturities by 1-2 years and exclude default events. Approval threshold is 75%, consent fee 0.25pt, deadline 4 Jul’23. Key details from the exercise:

• Exchange offer: Extends maturities of three bonds (PWRLNG407/25/22, PWRLNG7⅛11/08/22, PWRLNG6.9507/23/23) to 2024-2026, with 29-month extension for one bond and 1-2 year for others.
• Terms: Less favorable than previous round, including lower incentive fee (0.25pt), lower upfront principal repayment (2-3pts deferred), but better than distressed developers like Sunac and Evergrande.
• Comparison: Terms are less onerous than those seeking no principal repayment or coupon cuts, maintaining semi-annual coupon payments.
• Deadlines: All actions expire on July 4, 2023.

CMB International's analysis highlights Powerlong's effort to manage liabilities through bond exchanges and consent solicitations to maintain investor relations and extend maturities. This strategy helps avoid immediate maturity pressures but involves financial concessions.

Author Certification and Important Disclosures: Report views are personal and unrelated to compensation; no conflicts declared. CMBGM has investment banking relationships; securities involve risks, past performance not indicative of future results.