Swissport is looking to switch up its bonds to avoid being bumped into a default after being bought by China’s HNA Group last year, in a sign of the growing scrutiny on aggressive Chinese acquisition techniques.
China’s HNA Group completed its acquisition of Swissport in early 2016, raising debt on its own account to finance the deal, along with high-yield bonds and leveraged loans under Swissport’s name.
Swissport says it was not until a year later that it discovered the financing also involved the Chinese group using pledges over shares in Swissport, which were used as collateral before the acquisition actually closed. Under the terms of existing debt contracts, that would trigger a technical default.
To avoid this, on Tuesday, it offered holders of bonds maturing in 2021 and 2022 the chance to exchange into new bonds, while consenting to “waive existing/past or alleged/potential defaults or claims”. If successful, the exercise will also remove “all restrictive covenants” under the old notes – a technique usually dubbed an “exit consent”, as it punishes investors that refuse to exchange into the new securities.
This year has seen increased scrutiny of the opaque financing techniques large Chinese conglomerates use to buy overseas assets, particularly after Chinese regulators asked banks to probe their exposure to Dalian Wanda, Fosun, HNA and Anbang last month.
Alongside the bond exchange, Swissport is also refinancing its some loan facilities while amending the terms of its credit agreement.
Barclays and JP Morgan are managing the exchange offer, which expires on August 7th.