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China SCE Reaches Agreement in Principle for Debt Restructuring
November 29, 2024
China SCE reached a preliminary agreement with an ad-hoc group of creditors on the key commercial terms for its offshore debt restructuring proposal. The agreement marks an important milestone but is not yet legally binding. Negotiations regarding the finalized terms are ongoing and will be documented in a term sheet. Key points of the proposal include:
- Restructuring of Existing Debt: The proposal addresses approximately $2.27bn in existing debt, including accrued but unpaid interest up to 31 December 2024. The debt under restructuring consideration includes its 7.375% 2024s, 5.95% 2024s, 7% 2025s and 6% 2026s.
- Implementation via Scheme of Arrangement: The restructuring will likely be executed through a scheme in Hong Kong and possibly other jurisdictions.
- Timeline: The Company aims to launch a restructuring support agreement (RSA) with creditors by 15 February 2025 and complete the restructuring by 31 October 2025.
- Consent Fee: Creditors who support the proposal could receive a consent fee of 0.1% to 0.2% of the outstanding debt.
- Options for Creditors:
- Option 1: A mix of upfront cash (2.5% of claims) and short-term notes or loans, with a 70% notional haircut.
- Option 2: Mandatory convertible bonds and medium-term notes, with a 10% notional haircut.
- Option 3: Long-term notes or loans with no haircut, offering terms of 8 years at interest rates of 2.0% to 2.75%.
- Allocation Caps: The claims will be capped for Options 1 and 3, with excess claims allocated to Option 2.
Its dollar bonds continue to trade at deeply distressed levels of 5-6 cents on the dollar.
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