First debt restructuring via scheme of arrangement in Asia high yield market in 2021
On 18 May 2021, Hilong Holding Limited (1623.HK) successfully completed the restructuring of the Company’s US$165.114 million 7.25% notes due June 22, 2020 and US$200 million 8.25% notes due September 26, 2022 by way of a Cayman scheme of arrangement. Admiralty Harbour was the sole restructuring financial advisor to the Company in relation to the USD Notes and had led the formulation and implementation of the restructuring plan.
The Group’s operations were materially affected due to the outbreak of COVID-19 in late 2019, which had dampened crude oil demand globally and caused suspension of certain operating contracts and orders of the Group. This combined with the unavailability of offshore financing has led to a sudden and major deterioration in the Group’s cash flow situation. In May 2020, in an attempt to manage its liabilities, the Company commenced an exchange offer with respect to its 2020 Notes, which turned out to be unsuccessful as certain conditions precedent have not been met. As a result, the Company subsequently defaulted its USD Notes.
Admiralty Harbour took the lead in the formulation of restructuring plan and had been in active negotiations with noteholders since its appointment following the default of the USD Notes. The Transaction was completed by way of a scheme of arrangement in Cayman whereby part of the scheme considerations was paid in cash and part was paid in the form of new notes.
This Transaction has dealt with both the 2020 Notes and the 2022 Notes and was structured in a way that significantly improves the Company’s debt profile by effectively extending the maturities of the USD Notes by more than 3 years, which alleviates the short to mid-term cashflow pressure of the Company and allows ample time for the Company’s business to recover from the pandemic and oil price fluctuation.
The Transaction was highly recognized and supported by the noteholders. Following the publication of the commercial terms of the restructuring on 16 December 2020, the Company had successfully secured RSA accession with holders representing over 90% of the outstanding principal amount of the USD Notes in two weeks. At the subsequent creditors’ meeting, holders representing 97.85% of the outstanding principal amount of the USD Notes attended and voted in favour of the scheme, one of the highest among precedent cases. The scheme was approval by the Cayman court on 6 May 2021.
Following the completion of the landmark transactions in Shuifa Singyes and Shandong Yuhuang by Admiralty Harbour, this Transaction marks the third successfully completed in-court restructuring of USD notes issued by a China-based business since 2016 and marks the first successfully completed Asia’s high yield bond in-court restructuring deal in 2021. This Transaction is also the first ever successfully completed high yield bond restructuring deal in the Chinese oil and gas sector. Admiralty Harbour has worked seamlessly with the Company and professional advisors from the PRC, Hong Kong, Cayman Islands, UK and US, and successfully executed this Transaction which involves assets located in Ukraine, Oman, Nigeria and Pakistan etc. within 11 months, ultimately improved the maturity profile and enabling the Company to refocus on growing its business operations.
Congratulations to Hilong!