The speedy restructuring of a Chinese solar power company at the end of 2019 balanced creditors’ interests with the introduction of a state-owned investor and stood out for a fair approach that won overwhelming support from offshore bondholders.
China Singyes Solar Technologies Holdings, as it was then known, took a surprise hit in May 2018 when the Chinese government cut subsidies for solar power generation. Within months, banks pulled their credit lines and the company, which makes solar panels for buildings and power projects, defaulted on onshore and offshore bonds. One overseas financial institution filed a winding-up petition in Hong Kong, where the company is listed.
Singyes tried to raise funds by selling convertible bonds and new shares, but the plan failed and in October 2018 it failed to redeem US$155.26m of 6.75% senior notes, causing cross-defaults on its US$260m 7.95% senior notes due 2019 and Rmb96bn (US$15m) 5% convertible bonds due 2019.
The company appointed Admiralty Harbour as financial adviser and held talks with possible white knights – from private equity firms to energy companies and even high-net-worth investors. In the end, the best fit was with Shuifa Energy Group, a state-owned company that had partnered with Singyes on projects in the past.
The proposed investor wanted to ensure a debt resolution that would not water down the equity, while creditors were encouraged by Shuifa’s introduction but wanted to make sure it was signed before they agreed to amend terms of the debt. The two transactions were run in parallel and each was conditional on the other.
The offshore bonds were widely distributed, but a number of large holders came together to form an ad hoc committee, advised by Moelis. There was overwhelming support from holders of 98.4% of the offshore bonds for a restructuring support agreement.
The winding-up petition was also withdrawn after Singyes was able to reach a satisfactory resolution with the creditor.
Bondholders avoided a haircut on the principal, as the old notes were exchanged for US$415m in principal amount of new three-year bonds paying a cash coupon of 2% plus payment-in-kind interest of 4%.
Creditors also received a share of US$41.4m in cash, and those who signed the RSA received a share of an additional US$8.6m.
Water Development (HK) Holding, a subsidiary of Shuifa Group, agreed to subscribe to HK$1.6bn (US$206m) of shares in Singyes, giving it a 66.92% stake. Since this was the first time a white knight had helped a Chinese issuer’s US dollar bond restructuring, internal approvals were needed at multiple levels.
The success of the restructuring and Shuifa’s investment was obvious when in 2020 the renamed China Shuifa Singyes Energy Holdings was confident enough to take advantage of the market dip to repurchase some of the bonds in the open market, and later in a tender offer.
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