Chinese education giant XJ International hit with winding up petition after defaulting on US$324 million bond
One of China’s largest private education operators, XJ International, formerly Hope Education Group, is facing a winding up petition brought by international bondholders after it failed to meet a repayment deadline earlier this month.
The Bank of New York Mellon London branch, acting for a group of creditors, filed a petition with the High Court in Hong Kong on Wednesday to liquidate XJ and seeking payment of US$324 million of convertible bonds and US$27,056 of interest, the education company said in a stock exchange filing late on Thursday night.
Bank of New York is the trustee for the defaulted bonds and is taking legal action under the instructions of a group of international bondholders who own 49. 1 per cent of the offshore convertible bonds issued by the Chengdu-headquartered company.
“The ad hoc group was left with no choice but to pursue this course of action by the company’s failure to enter into substantive discussions either prior to or since its default on the convertible bonds in the amount of not less than US$324 million on 2nd March 2024,” the bondholders said in a statement.
The convertible bonds issued in March 2021 allowed holders to demand the company redeem all of the bonds on March 2, but the company allegedly failed to meet the redemption requirements.
After the default, the company and the bondholders held a meeting on March 14 but the bondholders said XJ “presented no concrete or credible plan” to repay the bonds, prompting them to sue. Kirkland & Ellis is representing the bondholders, and the first petition will be heard on June 19.
XJ, which was renamed last month, closed 3 per cent lower on Thursday at 24.7 HK cents before the announcement was issued after the market closed. The company’s share price has tumbled 60 per cent over the last year.
It is based in Sichuan and operates vocational schools and universities across mainland China with about 300,000 students and 20,000 staff. One of its major shareholders is Hope Education Investment which is a subsidiary of West Hope Group, a large agriculture conglomerate in the mainland.
Zhang Bing, chairman of XJ, said the company is seeking legal advice “to take the appropriate course of action.”
“The petition has had no material impact on the business operation of the company, and its subsidiaries and the operation of the company and its schools remain normal,” Zhang said in the exchange filing.
He admitted XJ is “experiencing difficulty in redeeming the relevant bonds” due to “the impact of the external environment, industry policies and the company’s current financial conditions.”
The company will continue to work with the bondholders to try to achieve a settlement, Zhang added.
