Holders of the bonds issued by Tuspark Forward Ltd (“TusPark”) are organising a bondholder group to represent their interest in an expected restructuring of US$400 million 7.95% guaranteed bonds due 2024 (ISIN: XS1863988157) (stock code: 5143) and US$550 million 6.95% guaranteed bonds due 2024 (ISIN: XS2011786659) (stock code: 4599).
On 12 August 2022, the night before the due date for partial payment of the principal promised by TusPark in a similar consent solicitation last year, TusPark said in an announcement that Tuspark, its parent guarantor Tus-Holdings Co Limited and two of the parent guarantor’s subsidiaries “are currently facing short-term liquidity issue in meeting their payment obligations under the Bonds”, and “an event of default under the terms and conditions of the 7.95% Bonds and the 6.95% Bonds, respectively will likely occur”.
It was also said that they “intend to engage in active discussions with holders of the Bonds with a view to conducting liability management of the Bonds on a consensual basis”.
On 23 August 2022, TusPark launched a consent solicitation to solicit consents from the bondholders to amend and to extend the Bonds by offering consent payment.
“It is a déjà vu,” says an unhappy bondholder (unnamed). “One year ago, Tuspark defaulted on the same bonds, and sought to amend and extend the bonds by offering consent payment to the bondholders who consent to the amendments. They succeeded last year. This year, Tuspark defaulted the bonds and failed to honour its other promises to the bondholders again. Now they want to run a consent solicitation like what they did last year. This is completely unacceptable.”
“Tuspark and Tus-Holdings Co Limited have not disclosed their latest financial information to the bondholders. According to the announcement, Tsinghua University no longer owns Tus-Holdings Limited, and the new shareholders of Tus-Holdings Limited offer no guarantee to the bonds. I am not prepared to consent to it this time and I am hoping all other bondholders will do the same. I simply have no confidence in their words or proposal; and a defacto rollover is not really an option, mindful of the rising interest rate and the increasing market risk in the real estate sector. Bondholders will need to work together to protect their interest,” said the unhappy bondholder.
“Tuspark defaulted the bonds again and now seeks to solicit consent from bondholders to the amendments and extension of the bonds by offering consent payment to the consenting bondholders. The bondholders are presently given 14 days (on or before 7 September 2022) to consider whether to consent; an early consent payment of 0.5% will be offered to bondholders if they consent within 7 days (on or before 31 August 2022); and if they do not consent by end of the 14-days period, they are excluded from the consent payment,” says Joseph Chu, a partner at international law firm Withers.
“Many bondholders are private clients – they do not know other bondholders and will not be able to collaborate with each other to make a decision that would be in their best interest,” says Chu. “This is a classic situation of Prisoner’s Dilemma for the bondholders if they do not collaborate with each other. One way to escape from it is for the bondholders to assemble now, seek professional advice, exchange views, ordinate their responses and act together, before it is too late. This will give them good bargaining strength, and will help them achieve a better result.”
A group of bondholders is hiring Withers as their legal advisor. The group is inviting other bondholders to join them. The group will seek to engage with Tuspark in discussions about any potential restructuring proposal and will coordinate their responses.
For further information, please contact:
Joseph Chu, Partner, Withersworldwide
joseph.chu@withersworldwide.com
