TCG CDS - no trigger!

All,

Some important detail in the fine-print of TCG’s Skeleton Argument filed with the court:

CDS:

- The news that the court approved the schemes to proceed on 18th of Spetember were not overly spectacular. However, it turns out that in the arguments filed, creditors are merely seeking to reduce the voting thresholds on the bonds. This is very interesting, and highly unusual. If anything it seems a CDS seller (bank) is prominent enough within the group to have successfully pressed for such an arrangement.

- A change of voting threshold only would not typically be big enough a change to the credit documentation to - in itself - trigger a default. Presumably the “Real Restructuring” would then proceed via an exchange offer - which, again, would be considered voluntary under the changed creditor documentation.

- So quite possibly there will be neither a trigger, nor a deliverable.

Deal Structure:

- As per our previous communications the deal can only make sense if the RCF is fully drawn, despite this being a period in which the company is usually flush with cash. We now have confirmation of that.

- The new equity stakes for Fosun and Creditors are likely going to be initially in PIK loan format. This should get around the need to make the restructuring subject to Shareholder consent between now and the restructuring and it should equally remove the regulatory hurdle of the Airline having to be owned more than 50% by EU based shareholders. However, it is unlikely to be a permanent arrangement and we are enquiring about the following steps.

Wolfgang