Jiangsu Zhongnan Construction Group, the Chinese real estate company, finally completed its exchange offer for the two bonds. However, not long after the payment completion, the firm announced default. The two paid notes were a $150m of 12% deal which should be due on June 8 this year and June 18 bond for a 10.875%. The outstanding amount of the notes are $72.85m before the exchange. The issuer was Haimen Zhongnan Investment Development International.
In a separate filling, the company argued that it did not plan to repay the remaining principal of the previous old notes. These notes were as much as $39m for June 8 and $18m for June 18. The company also added that these notes did not have grace period for the non payment of the principal. It means that if the company missed the payment on June 8, it would trigger default on June 18. Furthermore, the company said that it would relaunch the exchange offer for the remaining old notes.
Previously, Zhongnan offered bondholders an exchange for as much as $1.000 in principal amount of the old deal for $50 principal payment. In the filling, the company wrote that its bondholders agreed to accept the exchange offer. However, they argued that they were unable to submit the requirements on time. Therefore, the company continued to receive the bondholders so they could exchange the old notes in the same terms. Zhongnan also struggled to get bondholder consent in order to amend its terms on the 11.5% 2024 bond. This includes the default events.
This amendment allows the company to work on the non-payment of the two 2022 bonds that would not trigger cross-default on 2024 notes. Deal managers for this transaction would be Guotai Junan Securities and Haitong International Securities. The agent for exchange and tabulation would be DF King. So far, Moody’s has downgraded Zhongnan from B3 to Caa2.