Logan Halts Payments on Offshore Bonds, Appoints Advisors for ‘Holistic’ Restructuring

Chinese developer Logan Group has provided new details of the “holistic” approach it will take to work through its $6.6 billion debt load, including the suspension of interest payments on five sets of offshore bonds maturing over the next six years.

Despite the likely defaults, Logan remains committed to the fulfilment of its financial obligations, the Shenzhen-based builder said Sunday in a filing with the Hong Kong stock exchange. The group has yet to receive notice regarding acceleration of payment by holders of the five offshore bonds, which have a combined issuance size of $1.6 billion.

To evaluate its capital structure, Logan has hired Haitong International Securities as its financial advisor and Sidley Austin as its legal advisor in support of the effort.

“The company looks forward to having a constructive dialogue with and seeks the support and cooperation from all its creditors to stabilise its operations, unleash the value of its assets, and to attain a more stable capital structure that is crucial to the business and operations of the group,” chairman Kei Hoi Pang said in the filing.

Credit Collapse

Logan saw its credit downgraded by the major global credit agencies in March, with Fitch Ratings noting the company’s poor liquidity and failure to disclose off-balance-sheet private debt arrangements. Moody’s Investors Service, meanwhile, pointed to the widening gap between the company’s income and debt obligations.

“The rating downgrade reflects the company’s heightened refinancing and default risks because of its weakened contracted sales, deteriorated funding access and sizable debt maturities over the next 12 months,” said Cedric Lai, a Moody’s vice president and senior analyst.

On Sunday, Logan laid out several steps it would take to ease liquidity pressure, such as accelerating pre-sales and sales of its projects, speeding up collection of outstanding sales proceeds and other receivables, and cutting administrative costs and capital spending.

The developer will also dispose of assets when needed at reasonable prices, having made a start in April with a deal to sell 40 percent of an expressway project in southwestern China to Hong Kong’s New World Group for RMB 1.9 billion ($290 million).

With its annual report for 2021 yet to see the light of day, Logan in May hired Hong Kong-based UniTax Prism as its new auditor after Ernst & Young stepped down over disagreements concerning the audit’s timetable. In unaudited results published in March, the developer reported a profit attributable to shareholders of RMB 10.4 billion in 2021, down from RMB 13.4 billion a year earlier.

Outside Help

With its appointment of Hong Kong’s Haitong and American law firm Sidley Austin, Logan becomes the latest of China’s debt-saddled developers to turn to outside consultants to explore solutions.

In July, Jingrui Holdings named Admiralty Harbour Capital as its financial advisor, with Sidley Austin serving as legal advisor, after the Shanghai-based developer struggled to explain the mysterious disappearance of over RMB 4.9 billion ($730 million) in claimed bank deposits that led to PricewaterhouseCoopers resigning as its auditor in May.

Hong Kong-based Admiralty Harbour has also been retained for its services by Jingrui’s fellow defaulters China Evergrande and Shimao Group, while Sidley Austin is advising Shimao and Modern Land China.

Another embattled peer, Guangzhou R&F, issued its audited 2021 results on Sunday after several delays, posting a net loss of RMB 16.4 billion compared with a year-earlier net profit of RMB 9.1 billion.