A 30-year concession for the Dongshen Water Project forms the heart of a multi-layered restructuring plan designed to rescue insolvent provincial window company Guangdong Enterprises (Holdings) (GDE) from liquidators. The Pearl River Delta reservoir, with a capacity of 1.7 billion cubic metres, derives 93 per cent of its revenue through its sales to the SAR. With revenues this year projected at US$260 million and an estimated value of more than US$2 billion, it is the only asset the Guangdong provincial government has marked for injection into the GDE group as part of a restructuring plan unveiled to creditors yesterday. The work-out plan itself is a complicated arrangement involving a debt-to-asset swap under which GDE creditors would exchange US$3.9 billion in liabilities for US$3.6 billion in notes and preference shares and US$300 million in cash. If approved, a new provincial window company would emerge from the ashes of the old investment arm, with creditors sharing a 50 per cent stake with the Guangdong provincial government in GDE, which will emerge as nothing more than a debt-servicing instrument. The overall plan calls for four separate restructurings, of GDE, subsidiary companies Guangdong Investment (GDI) and Guangnan (Holdings) and Macau-based window company Nam Yue (Holdings). Goldman Sachs managing director Steve Shafran said the water company would be injected into a new provincial window company - New GDE - which, in turn, would sell the project to GDI. The transaction requires GDE creditors to exchange old claims for preference shares in the old company. The plan, Mr Shafran said, would leave GDE debt-free. But bankers expressed concern existing, mostly short-term, debt would be effectively extended for 10 years, during which creditors would hold no voting rights. To complete its restructuring, GDI would exit non-core businesses of infrastructure, utilities, property and hotels, by disposing of its manufacturing, finance, travel and retail assets. GDI's debts of US$1.2 billion would be rescheduled. Separately, Nam Yue (Group) would be acquired for a nominal price of HK$1 by the old GDE, which in turn would combine the Macau company's debts of US$300 million with its other outstanding liabilities. Guangnan (Holdings), with debts of about US$488 million, also faces an overhaul. Under the Goldman Sachs scenario, it would retain core businesses, while shifting non-core businesses to the control of an asset management subsidiary. At the same time, creditors would exchange liabilities for a combination of new debts, convertible bonds and US$100 million in fresh capital. This would be raised through a nine for one rights issue, priced at 10 HK cents per share and underwritten by New GDE. Mr Shafran said the four restructurings were interrelated but could be carried out separately.
