Bond Market Monitor: Century Sunshine provides an update on its restructuring progress

Important Events

• On Thursday, the People’s Bank of China (“PBC”) announced that it has cut its one-year Loan Prime Rate (“LPR”) by 10 basis points to 3.7%. This marks the second straight month the PBOC has cut its benchmark rate, following a 5 basis points reduction in December 2021. LPR is seen as a benchmark for lending rates for corporate and household loans in the country.

• On Thursday, the Monetary Policy Committee (“MPC”) of Bank Negara Malaysia decided to maintain the Overnight Policy Rate at 1.75 percent. For Malaysia, indicators show that economic activity rebounded in the fourth quarter, in line with the relaxation of containment measures. For 2021, growth will be within the projected range of 3% - 4%. Looking ahead, growth is expected to gain further momentum in 2022.
  
  Headline inflation has averaged 2.3% for the period January-November 2021. For 2022, average headline inflation is likely to remain moderate as the base effect from fuel inflation dissipates. Core inflation is expected to be modest, with upside risk contained by the continued slack in the economy and labour market. The outlook, however, continues to be subject to global commodity price developments amid risks from prolonged supply-related disruptions.

Asian High Yield Bond Index

• The Barclays USD Asia High Yield Bond Index rebounded 1.7% for the week ended 21 January 2022.

• On Tuesday, Agile Group Holdings Limited announced that the company further repurchased its AGILE 6.700% 07Mar2022 Corp (USD) in an aggregate principal amount of USD 10m. As at 18 January 2022, the company have repurchased USD 23m of the AGILE 6.700% 07Mar2022 Corp (USD).

• On Wednesday, China Aoyuan decided that it will not make payments for the remaining principal and interest on the bond maturing in January 2022 and the interest on bonds maturing in 2023 and 2024 after the expiry of the 30-day grace period.

• On Thursday, Yuzhou Group announced that the Exchange Offer for the group’s bond with a total principal amount of around USD 477.2m (representing around 82.0% of the total aggregate bond principal) has been approved.

• The yield of 2-year US Treasuries (“UST”) increased by 3 bps to 1.0014% while the 10-year UST yield decreased by 3 bps to 1.7581%.

Corporate Updates and New Issues

• On Monday, Chip Eng Seng Corporation Ltd. with its subsidiaries (the “Group”) announced the appointments of Mr Law Cheong Yan as Group Chief Corporate Officer and Chief Operating Officer of the Group’s education division. Additionally, Mr Kenny Yong Shan Siong was appointed as Group Chief Financial Officer. The appointments have taken effect from 17 January 2022.

• Frasers Centrepoint Trust announced on Monday that the company has appointed Mr Roy Bailey of Ernst & Young Ltd. and Ms Eleanor Fisher of EY Cayman Ltd. as liquidators for the voluntary liquidation of the following indirect wholly-owned subsidiaries of Frasers Centrepoint Trust – (a) Jistybay Limited; (b) Kinta City Limited; and (c) Witmer Limited. Additionally, Mr Joel Edwards of EY Bermuda Ltd. has been appointed as the liquidator of Asiaretail Fund Limited.
  
  The subsidiaries are being liquidated by a way of voluntary liquidation as the companies have ceased to trade and have no intention of trading in the future. Additionally for Asiaretail Fund Limited, it is no longer required for the purpose it was established and the business of Asiaretail fund Limited has ceased.

• On Monday, Maxi-Cash Financial Services Corporation Limited (“Maxi-Cash”) announced on 17 January 2022 that additional notes will be issued pursuant to the tender and exchange offer for its existing MSFSSP 6.350% 22Jul2022 Corp (SGD). The new issue will be unsubordinated and unsecured and has a tenor of 3 years, maturing on 24 January 2025. The notes will bear a coupon of 6.05% and will be unrated. The use of proceeds from the additional notes will be used for general corporate purposes, including but not limited to, refinancing or repayment of existing borrowings and financing of investments, acquisitions or capital expenditure of the company. Investors who are interested may read our new issue view here.

• On Tuesday, Hyundai Capital Services, Inc. (“HCS”) announced the pricing of 2 USD bonds – a 3.25-year USD bond at an initial price guidance of CT3+110 basis points and a 5-year USD Green bond at an IPG of CT5 + 125bps. With a final price guidance of 2.125% and 2.500% respectively, the bonds are expected to receive a credit rating of ‘BBB+’ from both S&P and Fitch Ratings. Investors who are interested may read our new issue view here.

• On Tuesday, Olam International Limited (“Olam”) released an exchange offer and Consent Solicitation Exercise (“CSE”) last week. The exchange offer relates to the OLAMSP 5.500% Perpetual Corp (SGD) where Olam is proposing to exchange the 5.500% perps to form a single series with the OLAMSP 5.375% Perpetual Corp (SGD).
  
  Following the proposed transactions announced in December 2021, the completion of the Proposed Transactions, there will be three operating groups, being the OFI Business, the OGA Business and the OIL Business. The OFI Business will remain with Olam International Limited whilst the OGA Business and parts of the other businesses will be under a new holding company, Olam Group Limited ("OG").
  
  Among others, Olam is seeking the approval of the bondholders to waive any potential event of default or event of default for some bonds that may arise as a result of the Proposed Transactions.
  
  Bondholders of the Olam notes should note that the early consent fee deadline is on 31 January 2022, 5pm while the expiration for the CSE and exchange offer ends on 7 February 2022, 5pm. The meeting to decide the voting outcome will be on 9 February 2022. Noteholders may read our recommendations in our article published here. 

• Last Tuesday, Century Sunshine Group Holdings Limited provided an update on the group’s restructuring progress. The company said that 3 assets will be included in its proposed Scheme of Arrangement. These include (a) 20% of the issued shares capital of Rare Earth Magnesium Technology Group (“REMT”) held by Ming Xin Developments Limited; (b) net sale proceeds from the sale of land in Zhangzhou; and (b) dividend payments from Shandong Hongri after the realisation of the Shandong Lands. Any remaining balance of the abovementioned assets, after the debts under the proposed Scheme are fully repaid, will be transferred to the REMT Scheme for settlement of claims against the creditors of REMT.
  
  In a separate announcement, REMT notified that it will implement the REMT Creditors’ Scheme, which comprises (i) a Term Extension Option; (ii) the Convertible Bonds Swap Option; and (iii) a combination of the aforementioned two options. Each REMT Scheme Creditor is entitled to elect between options (i), (ii) and (iii) above.
  
  Century Sunshine will give financial assistance to REMT in favour of the REMT Scheme Company. A corporate guarantee shall be executed on or around the REMT Scheme Effective Date in favour of the REMT Scheme Company, to guarantee REMT’s punctual payment of the interim distribution payable and the final payment to the Term Extension Option Creditors on the terms under the REMT Creditors’ Scheme. However, the potential corporate guarantee is only enforceable upon the full and final settlement of all liabilities owed to the Century Sunshine’s creditors under the proposed Scheme.

• On Wednesday, GuocoLand Limited announced that its subsidiary, GuocoLand Malaysia Berhad (“GLM”) announced that its wholly-owned subsidiaries, Kiapeng Development Sdn Bhd and Corebright Management Sdn Bhd, had been placed under voluntary winding up. Both companies have ceased operations and there are no future plans for the companies.

• On Wednesday, Keppel Pacific Oak US REIT Pte. Ltd. announced that it has obtained a USD 80m term loan facility. Under the terms and conditions, Keppel Pacific Oak US REIT will be required to pay all outstanding loans within 10 business days in the event that: (a) the manager of the REIT ceases to be the manager of Keppel Pacific Oak US REIT; or (b) (i) Keppel Corporation Limited and its subsidiaries, (ii) Pacific Oak Capital Advisors LLC and its subsidiaries and/or (iii) KORE Pacific Advisors Pte. Ltd., cease to collectively, directly or indirectly, own all the issued share capital of the REIT’s manager. 

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