Trlpc: Sound Global aims to prepay loan and avoid wider default

Far Eastern International Bank

23/04/2015 17:01

By Carol Zhong 
    HONG KONG, April 23 (Reuters) - Chinese waste water 
treatment company Sound Global Ltd  0967.HK  is seeking a second 
waiver from lenders on a $110 million syndicated loan that it is 
trying to prepay in a bid to avoid a wider debt default, bankers 
said on Thursday. 
    Sound Global is asking lenders to waive a technical default 
on the loan after breaking covenants which stated that its 
shares could not be suspended for more than 15 trading days. 
    Privately-owned Sound Global's shares were suspended on 
March 16 when the company delayed publishing its 2014 annual 
results, boosting fears of rising defaults among heavily 
indebted Chinese companies.  
    Sound Global's $110 million loan was arranged by Taiwan's 
Far Eastern International Bank, which signed the loan on October 
2013 with seven other Taiwanese and Hong Kong banks.    
    The company was due to make a first $14 million repayment on 
April 28, but instead secured a first waiver in early April 
which would allow it to prepay the loan in full.    
    Far Eastern International Bank  2845.TW  sent lenders an 
email saying  that Sound Global intended to present a new 
repayment schedule by April 21 and to prepay the loan by  April 
30, bankers said.  
    Far Eastern International Bank declined to comment. Sound 
Global was not immediately available to comment.  
    The company made a second request to lenders to waive the 
technical default relating to its share suspension.  
    Lenders are likely to grant the second waiver, which must be 
approved by two-thirds of lenders by commitment size, despite a 
lack of fees, sources said.   
    "I think the lenders will give the green light to the 
waivers as the company has operated for more than 20 years and 
has some new ongoing projects," one banker said. 
    "The only choice left for us is to approve the waiver to 
ensure a proper repayment of the loan," a second banker said. 
     
    WIDER DEFAULT?  
    The loan covenants also require the company's audited 2014 
results to be filed by April 30. If it fails to do so, it will 
default on a $150 million bond issue.  
    Shenzhen property developer Kaisa Group  1638.HK  became the 
first Chinese real estate company to default on dollar bonds 
when it defaulted on $1 billion of debt on Monday.  
    Several other Chinese companies ran into problems with 
syndicated loans last year including industrial chemical maker 
China Lumena New Materials Corp  0067.HK , which was unable to 
repay an $85 million, one-year unsecured loan that matured in 
April 2014. 
    Chinese footwear manufacturer Ultrasonic AG  US5.DE  also 
ran into difficulty when two executives disappeared with the 
proceeds of a $60 million, three-year loan last September. 
    Moody's downgraded Sound Global's corporate family rating to 
Caa1 from Ba3 and its senior unsecured debt was cut to Caa2 from 
B1 in April and said that there was a high probability that the 
company may not publish audited 2014 financial statements in the 
next 30 days. 
    "The company's inability to complete its audited 2014 annual 
results also impairs its access to funding," said Chenyi Lu, 
senior analyst at Moody's who added that "the downgrade also 
reflects heightened corporate governance risk". 
    S&P also said in a report on April 1: "In our view, Sound 
Global could also face liquidity stress if the company cannot 
complete its scheduled debt covenant test, which will be based 
on its annual audit." 
 
  
 
 (Editing by Tessa Walsh) 
 ((tessa.walsh@thomsonreuters.com; +44 207 542 4048; Reuters 
Messaging: tessa.walsh.thomsonreuters.com@reuters.net)) 
 
Keywords: SOUND GLOBAL LOANS/