Recently, Chinese company Winsway Enterprises Holdings Ltd., a major metallurgical coal importer, trader and processor, announced that it had filed for Chapter 15 bankruptcy protection in the U.S. According to The Wall Street Journal, the bankruptcy petition was part of a proposed agreement with its bondholders to refinance over $349 million in debt.
Winsway Enterprises moves to shield its assets
Winsway Enterprises sought Chapter 15 bankruptcy protection in the U.S. Bankruptcy Court in New York after several years of financial losses in its coal operations. These losses were directly tied to the significant drop in demand for Chinese steel. In fact, since the second quarter of 2015, Winsway has lost roughly $204 million on $438 million in revenues. At the time of its recent filing, the company’s debt bonds were set to mature, which would have sent Winsway into insolvency.
The Chapter 15 bankruptcy petition would allow it to shield its U.S. assets from bondholders while it continues to work out financial troubles in Chinese courts. If its petition is approved by the court, the company will be afforded protection under U.S. .
The proposed restructuring plan for Winsway Enterprises
As Winsway’s current coal-trading operations were no longer a viable business, the company’s proposed plan is to become an integrated supply-chain solutions provider for commodities customers and banks. This would effectively transform the company away from its coal-trading business model.
As part of its proposed reorganization plan, bondholders would be given a debt-for-equity swap for roughly $41 million in cash and an 18.75 percent share in the newly restructured company. While this proposal is still being decided in Hong Kong courts, it received support from 83 percent of its bondholders. The deal also calls for bondholders to receive contingent value rights that will offer them an additional $10 million payment in the event the company meets its profit threshold. All told, the deal would effectively offer bondholders 35 cents on the dollar.
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