In the News

Shanshui Dollar Bonds Jump by Record on Conditional Loan Vows

by Lianting Tu, Christopher Langner, David Yong

November 18, 2015,11:34 AM HKT

  • ACC, Tianrui offer make conditional offers to extend loans

  • ACC's conditional pledge raises the stakes, Lucror says

China Shanshui Cement Group Ltd.’s dollar bonds jumped by a record after two of its major shareholders made conditional offers to extend loans following the manufacturer’s bond default.

Asia Cement Corp. said in a filing with courts in the Cayman Islands, where Shanshui is incorporated, that it has agreed to make a $800 million credit line available to recapitalize Shanshui pending an agreement on its restructuring proposal, according to a person close to the matter. Tianrui Group Co. will lend the funds if its proposed restructure of Shanshui’s board occurs and triggers a clause that will enforce early repayment of $500 million of 2020 bonds, it said in a Tuesday filing. The notes jumped 14 cents on the dollar to 84 cents as of 11:06 a.m. in Hong Kong.

Shanshui became at least the sixth Chinese firm to default in the local bond market this year as a shareholder tussle hurt financing. The cement maker, which missed payment on a 2 billion yuan ($313 million) note last week, faces a hearing Wednesday on a liquidation application filed in the Cayman Islands.

The Asia Cement conditional offer "raises the stakes after Tianrui’s offer last evening to help redeem the 2020 notes,” said Charles Macgregor, head of Asian high yield research in Singapore at Lucror Analytics. “The matter is now firmly in the hands of the court and hopefully they can give some direction this week."

ACC Offer

Doris Wu, chief financial officer in Taipei at Asia Cement, declined to comment. Shanshui’s CFO Henry Li said when reached by phone that he had heard from his lawyers that ACC has made a filing in the Cayman Islands saying ACC is willing to lend to Shanshui. Li didn’t give any specifics on the size of the loan.

ACC’s offer is a capital injection so will translate into a larger equity position, though details are still being worked out, the person said, asking not to be identified because the details are private. Some $500 million would be used to repay 2020 notes in full and the balance would support onshore operations and trade creditors, according to the person.

Asia Cement holds a 20.9 percent stake in Shanshui while Tianrui holds 28.2 percent. 

Lawfirm Akin Gump Strauss Hauer & Feld is representing a group of bondholders in the restructuring, according to a press release on Nov. 11.

Shanshui has considered proposals for repaying debt including new share issues, asset restructuring and asset securitization, it said in a Monday filing. It also said that if the Cayman court grants the application and appoints provisional liquidators, they’ll have the right to choose and implement proposals to repay Shanshui’s debts.