Modern Land Says it has Identified Holders of Over 90% of $250M 12.85% Notes Due Oct. 25 for Consent Solicitation; Funding Mismatch Caused by Delay in Onshore Loan Approval; Only $100M Cash on Hand

Management of China-based property developer Modern Land told bondholders on a conference call today, Oct. 12, that the company has identified the holders of more than 90% in principal amount of the $250 million 12.85% senior notes due Oct. 25, 2021 for its proposed consent solicitation to extend the notes' maturity by three months. Continue reading for more reporting on Modern Land's proposed consent solicitation from our Asia Core Credit team, and request a trial to access reporting and analysis on stressed, distressed and performing credits in Asia. 

Management said the company only has $100 million offshore cash and overall just RMB 450 million at holding company level. There is a cash shortfall due to a delay in the approval of an onshore loan but management expects to be able to redeem its next maturity, the $200 million 11.8% notes due Feb. 26, 2022, using operating cash and a shareholder loan. Modern Land has also suspended all land acquisitions in the fourth quarter in order to preserve cash and there are available channels for transferring funds from onshore to offshore, management added.

Modern Land’s chairman Zhang Peng is expected to provide a RMB 800 million ($124 million) interest-free shareholder loan within the next two to three months and the exact amount of the loan can increase if necessary according to management, who did not disclose the sources of funding for the loan, only saying Zhang is in the process of raising the remainder of the funds.

Modern Land also has a $300 million offshore bond issuance quota if there is a suitable financing window, management added.

Property sales are expected to improve in the fourth quarter after private property developers were requested by regulators last month to provide opinions on government policies, management said. Modern Land will start selling RMB 20 billion worth of properties in the fourth quarter which will generate about RMB 13 billion sales revenue and RMB 6.8 billion to RMB 7.5 billion cash collection according to management. Total cash expected to be collected during the quarter is between RMB 8 billion and RMB 10 billion, which is sufficient to cover land payments and construction loans.

Pleading for bondholders’ support, management said the company has been impacted by the tightened financing environment and property market downturn and it will need more time to resolve the short term liquidity problem, but it did not disclose whether there is a contingency plan if the proposed consent solicitation fails.

The capital structure of Modern Land is below: