Winsway May Consider Bond Buyback in Restructuring, Lucror Says
by David Yong
2:06 PM HKT
March 27, 2015
(Bloomberg) -- Winsway Enterprises Holdings Ltd., a Chinese importer of coal for steelmakers, could buy back bonds as part of a debt restructuring amid the slump in commodity prices, according to Lucror Analytics.
A second tender offer within two years may be an option after the company said in a release Thursday it plans to restructure its 2016 notes, Singapore-based analyst Trung Nguyen said by phone Friday. Hong Kong-listed Winsway also intends to raise cash from a stock offering, according to the statement that said the two plans can only go ahead if both are executed.
Coking-coal prices have fallen 2.3 percent this year following a four-year slump, Energy Publishing prices showed. Asian coal-related producers including Mongolian Mining Corp., PT Bumi Resources and PT Berau Coal Energy have sought debt relief from noteholders in the past year as cash flow suffered.
“The buyback option is available to them if they can get the equity financing going at the same time,” Lucror’s Nugyen said. “Given the challenging liquidity condition, there isn’t much cash left to do a tender offer as well as finance their working capital needs.”
Winsway spokeswoman Laura Shi said the company hasn’t confirmed details of the restructuring and wouldn’t comment on a potential buyback when contacted by phone on Friday.
The company has hired UBS Group AG and AlixPartners LLP as financial advisers to negotiate with bondholders, after posting a HK$1.2 billion ($155 million) loss and 78 percent fall in cash-in-hand to HK$439 million last year. UBS declined to comment.
China Demand
China’s economy is forecast to grow at 7 percent this year and 6.7 percent in 2016, according to the median forecasts in Bloomberg surveys, clouding the prospects for coking coal, which is used to make steel. Asia’s biggest economy grew last year at the slowest since 1990, official data showed.
Winsway’s 8.5 percent 2016 notes were 0.33 cents higher at 33.75 cents on the dollar as of 12:42 p.m. in Hong Kong, according to Bloomberg-compiled prices. They’ve fallen 4.2 cents so far this year.
Winsway sold the $500 million of bonds in April 2011 at par value, according to Bloomberg data. It repurchased notes with a face value of $151.2 million in an October 2013 tender, triggered by uncertainty about the company’s capacity to repay principal after a sustained decrease in coking coal prices, according to filings.
“It’s hard to see them redeeming the bonds at maturity because of the state of the company,” Nguyen said. “Winsway’s gross profit is almost zero and it’s burning cash.”
To contact the reporter on this story: David Yong in Singapore at dyong@bloomberg.net
To contact the editors responsible for this story: Katrina Nicholas at knicholas2@bloomberg.net Chris Bourke, Andrew Monahan