KAISA GROUP HOLDINGS LTD. Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.
This announcement does not constitute an offer to sell or the solicitation of an offer to buy any securities in the United States or any other jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No securities may be offered or sold in the United States absent registration or an applicable exemption from registration requirements. Any public offering of securities to be made in the United States will be made by means of a prospectus. Such prospectus will contain detailed information about the company making the offer, its management, as well as financial statements. No public offer of securities is to be made by the Company in the United States.
佳 兆 業 集 團 控 股 有 限 公 司 *
(Incorporated in the Cayman Islands with limited liability)
(Stock Code: 1638)This announcement is made by the Company pursuant to Rule 13.09(1) of the Listing Rules and the Inside Information Provisions (as defined under the Listing Rules) under Part XIVA of the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong).
Unless otherwise defined, capitalised terms in this announcement will have the same meaning as those defined in the Company's announcements dated 8 March 2015 and 6 November 2015.
Kaisa Group Holdings Limited ('Kaisa' or the 'Company') makes this announcement in response to recent press reports in relation to a communication received from Farallon Capital Asia Pte. Ltd. ('Farallon').
* For identification purposes only
PRELIMINARY NON-BINDING FARALLON PROPOSALThe Company confirms that a draft term sheet and letter with the heading 'Preliminary, Non- Binding Proposal' was received yesterday at 3:45 pm (HK time) from Farallon ('Preliminary Non-Binding Farallon Proposal'). Despite media reports to the contrary, none of the Directors (including Chairman Kwok Ying Shing) have met with or engaged in dialog with Farallon to date on the Preliminary Non-Binding Farallon Proposal, the key terms of which are summarized below:
subject to the conditions described below, a consortium of investors led by Farallon intend to inject US$150 million into the Company in exchange for new shares representing 75% of the share capital of the Company as enlarged by the issue (the 'Equity Injection'). The Preliminary Non-Binding Farallon Proposal does not identify the consortium which it is intended will make any formal proposal;
the existing shareholders of the Company to receive a pro rata share of US$5 million in cash and warrants which are excisable at HK$0.07 per share with an exercise period of 12 months (the 'Warrants'); assuming full exercise of the Warrants by the existing shareholders and the injection of approximately US$510 million into the Company, they will hold 80% of the issued share capital of the Company as enlarged by the issue and the Equity Injection;
the Existing HY Notes will be exchanged into four new tranches of notes maturing 2017,2019,2020 and 2021 (the 'New Senior Notes'). The New Senior Notes will have terms substantially similar the Existing HY Notes and otherwise shall have terms as follows:
New 2017 Senior Notes
Maturity: 21 December 2017 Size: US$117 million
Annual coupon: 3% PIK
New 2019 Senior Notes
Maturity: 21 December 2019 Size: US$585 million
Annual coupon: 8% PIK and 1.5% cash coupon up to 21 December 2017 and 9.5% cash coupon thereafter
New 2020 Senior Notes
Maturity: 21 December 2020 Size: US$702 million
Annual coupon: 9.5% PIK and 2% cash coupon up to 21 December 2017 and 11.5% cash coupon thereafter
New 2021 Senior Notes
Maturity: 21 December 2021 Size: US$936 million
Annual coupon: 10% PIK and 2.5% cash coupon up to 21 December 2017 and 12.5% cash coupon thereafter
the Convertible Bonds will be exchanged for new 2019 convertible bonds (the 'New 2019 CBs') which will have terms substantially similar to the Convertible Bonds, and otherwise shall have terms as follows:
Maturity: 21 December 2019 Size: RMB1,560 million
Annual coupon: 6.5% PIK and 2% cash coupon up to 21 December 2017 and 8.25% cash coupon thereafter
Conversion price: 30% above X where
X = the implied equity value of Kaisa based on the last quoted price of the shares of the Company prior to suspension (without giving effect to the Equity Injection and the exercise of the Warrants) divided by the number of shares of the Company after giving effect to the Equity Injection and the exercise of the Warrants); and
net cash proceeds from the Equity Injection, after payment of the dividend to existing shareholders, will be deposited into an offshore bank account and held as restricted cash for at least two years following the closing, which cash shall only be used for interest payments of the New HY Notes and the New 2019 CBs.
It is preliminary in nature and conditional on a number of items, including:
completion of customary legal and financial due diligence;
negotiation and execution of definitive documentation;
entry into restructuring support agreements by the requisite number of existing shareholders, holders of the Existing HY Notes and holders of the Convertible Bonds necessary to approve the proposed transaction under applicable laws;
obtaining requisite shareholder approval for the issuance of new common equity under a specific mandate;
obtaining all requisite regulatory approvals including the necessary approval by the Stock Exchange;
successful implementation of a capital reorganisation followed by a consolidation of outstanding shares (through a reverse split) to reduce the impact of the proposed transaction on the outstanding share count;
These conditions are all likely to cause significant delay and distract from the substantial efforts being made to progress the Proposed Restructuring, as announced by the Company on 6 November 2015.
It contains a number of commercial provisions that are not consistent with the goal of maximizing value for the Company's stakeholders, including:
the issuance of equity at an implied pre-money valuation of HK$387.5 million (US$50 million), which is a 95% discount to the total market capitalization of Kaisa immediately preceding the suspension of trading on 31 March 2015; and
a condensed maturity profile on the New Senior Notes that is not supported by the Company's projected cash flows.
the stabilization of the business and managing liquidity in the current difficult operating environment;
finalizing restructuring terms with its onshore creditors to resolve ongoing litigation, 'unfreeze' assets that are currently subject to sales restrictions and preserve the going concern value of the Company;
finalizing documentation and moving forward with implementation of the Proposed Restructuring, which was the result of many rounds of extensive negotiations with the Steering Committee and provides the following benefits to the Company and holders of the Existing HY Notes and Convertible Bonds (among others):
sustainable capital structure that de-risks execution of the business plan;
strong credit and deleveraging profile, creating realistic refinancing alternatives for existing creditors over time;
sharing of upside with all creditors (as opposed to just the Farallon consortium) through the issuance of CVRs to holders of the Existing HY Notes and lower strike price on the Convertible Bonds; and
credit for accrued and unpaid interest on the Existing HY Notes and Convertible Bonds through the date on which the Schemes become legally binding and effective, which results in incremental total debt claims of in excess of US$150 million to holders of the Existing HY Notes and Convertible Bonds.
The Directors, in their fiduciary capacity, welcome all constructive proposals with the view to maximizing value for all stakeholders of Kaisa. Having considered the Preliminary Non- Binding Farallon Proposal, they have come to the following conclusions in relation to the Preliminary Non-Binding Farallon Proposal after consultation with the legal and financial advisors to the Company:
In light of the above, the Directors are of the view that the Preliminary Non-Binding Farallon Proposal contains a significant degree of uncertainty with respect to timing and completion; and that the Proposed Restructuring offers a superior benefit to existing stakeholders. Consequently, the Company intends to continue to work judiciously to finalize documentation and move forward with the implementation of the Proposed Restructuring.
Kaisa continues to focus and devote substantial resources to:
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