Bondholders approve Greentown buy-back plan
Greentown China Holdings has received support from most of its bondholders for a US$400 million repurchase plan, removing concerns over an imminent payment default.
The mainland developer said it had received consent from holders of 89.92 per cent of the total principal amount, or equivalent to US$358.86 million, before the Monday deadline to sell back their holdings.
Greentown said it would finance the buy-back through its 1.8 billion yuan (HK$2.04 billion) trust financing and internal resources. Bondholders who accepted the deal would receive an offer by May 26, it said.
Greentown shares rose 6.67 per cent to close at HK$5.76 yesterday. It has gained 20.25 per cent since Monday.
Standard & Poor's and Moody's Investor Service have put a negative outlook on Greentown after the developer made the offer to buy back its US$400 million senior notes at 85 per cent of face value on April 21.
If Greentown's repurchase plan failed, it would be forced to repay the notes earlier than the 2013 due date.
Despite the bondholders' support, Moody's yesterday said Greentown's negative ratings outlook as well as the Caa1 corporate family rating and Caa2 senior unsecured bond rating remained unchanged.
'The successful buy-back and consent solicitation has alleviated concerns over an imminent payment default, [but] the Caa1 corporate family rating continues to reflect Greentown's weak financial and liquidity positions,' said Kaven Tsang, an analyst at Moody's Asia-Pacific.
'The company has high debt leverage and limited financial flexibility as the majority of its free cash resources will be applied to buy back the bond.'
The rating further reflected Greentown's lack of a concrete refinancing plan to cover its exposure to high near-term refinancing risk, namely the potential put option of 2.3 billion yuan convertible bonds in May next year, he said.
Greentown's last week said the firm planned to lower its gearing ratio to less than 100 per cent in the next few years.
The firm's gearing ratio shot up 52 percentage points to 140 per cent last year from 88 per cent in 2007. Total debt rose to 16.1 billion yuan, of which 6.6 billion yuan is repayable this year.
