According to the Zhitong Finance App, Yiju Enterprise Holdings (02048) announced that the company has agreed to push TM Home to issue the first batch of subscribed shares on the completion date of the first share subscription agreement, issue the second batch of subscribed shares on the completion date of the second share subscription agreement, and subscribe for the first batch of subscribed shares and the second batch of subscribed shares in accordance with the terms and conditions of the share subscription agreement. After the second TM Home share issuance is completed, the company and TM Home's minority shareholders will hold approximately 99.212% and 0.788% of TM Home's issued share capital, respectively. The second issue of TM Home shares shall take place on the effective date of the restructuring and immediately before the distribution of convertible bonds to convertible bond shareholders pursuant to the restructuring. The proposed transaction under the share subscription agreement was approved by independent shareholders at the company's special shareholders' meeting held on July 27, 2023. After completing the first TM Home share issuance on August 15, 2023, the company and TM Home's minority shareholders held approximately 89.207% and 10.793% of TM Home's issued share capital, respectively.

As part of the restructuring, the company plans to propose new plans to old note holders and convertible bondholders. If the new plans are determined to be valid by the relevant court, the company will pay participating plan creditors a restructuring price consisting of the following components on the effective date of the restructuring:

(i) Claim $60 in cash from plan creditors for every $1,000 (or equivalent in Hong Kong dollars) held by each plan creditor at the record time;

(ii) Where plan creditors are holders of old notes, the cost also includes shares of creditor special purpose companies transferred in proportion to the proportion of plan creditor claims held by each relevant plan creditor at the record time to the proportion of plan creditor claims of such plan creditors; and

(iii) On the effective date of the restructuring, the company will prompt TM Home to issue a certain number of new shares of TM Home in proportion to creditor special purpose companies and convertible bond shareholders, taking into account the total claims ratio of plan creditors held by old note holders and convertible bondholders at record time, so that after the relevant issuance, the total shares of TM Home equity held by creditor special purpose companies, convertible bond shareholders and TM Home minority shareholders will reach 65%. Following the relevant issuance, creditor special purpose companies will hold about 54.207% of TM Home's shares, and convertible bond shareholders and TM Home minority shareholders will jointly hold about 10.793% of TM Home's shares. The remaining 35% of TM Home's shares will be held by the company and its affiliates, of which 15% will be transferred to special purpose companies (i.e. management special purpose companies) held by TM Home's senior management members appointed by the company.

The general principle of restructuring is to provide plan creditors with cash and a controlling interest portfolio in TM Home. After the restructuring is completed, TM Home will own and operate the company's two business lines, namely the real estate data and consulting service business currently operated by Kerry and the online real estate marketing service business in cooperation with Tmall Network, and a controlling interest in Leju (a company listed on the New York Stock Exchange and a leading online and offline real estate service provider in China, mainly engaged in providing real estate e-commerce, online advertising and online listing services through its online platform). TM Home will not operate or own the real estate brokerage network services operated by the company under the “Home Friends” brand, and the relevant real estate brokerage network services will be transferred to a Chinese holding company before the sale is completed. Therefore, this is actually the Group's sale of TM Home, Corey, Leju, and their respective subsidiaries. After the sale is completed, TM Home, Corey, Leju, and their respective subsidiaries will no longer be subsidiaries of the company, and the real estate brokerage network services carried out by the company under the “House Friends” brand will continue to be operated by the company.

To ensure that the company can continue to operate TM Home's business in accordance with the new business cooperation agreement, the company, management special purpose companies, creditor special purpose companies, TM Home minority shareholders, convertible bond shareholders, and TM Home will enter into shareholder agreements relating to TM Home (TM Home Shareholder Agreement) on or before the effective date of the restructuring. Following the sale, the company will continue to operate TM Home until August 31, 2024 in accordance with the TM Home shareholder agreement, although it only holds 20% of TM Home's shares.

According to the TM Home valuation report, as of July 31, 2023, the fair value of all of TM Home's shares (prepared according to the income method) was RMB 1.86 billion (TM Home valuation).

According to Kerry's valuation report, as of July 31, 2023, the fair value of all Kerry's shares (prepared according to market law) was RMB 1,327 billion (Kerry valuation). Before the sale is completed, the company is expected to undergo an internal restructuring, in which Corey will become a subsidiary of TM Home.

The Group is a real estate transaction service provider in China. As of the date of this announcement, it mainly provides first-hand housing agency services, real estate data and consulting services, and real estate brokerage network services. After the restructuring and sale matters are completed, the remaining groups will continue to provide first-hand housing agency services, mainly including formulating and implementing marketing and sales strategies and facilitating sales transactions for real estate projects developed by real estate developers; and real estate brokerage network services under the “Fangyou” brand, which mainly includes integrating small and medium-sized second-hand housing brokerage stores in China and providing rich resources to strengthen their business operations (collectively referred to as “remaining business”). Restructuring and sale matters are an important part of the Group's debt restructuring plan. After considering its options, the board of directors decided that restructuring was the most appropriate next step, which would not only meet the needs of all stakeholders, but also preserve most of the core business operated by the Group as a leading real estate service provider in China. Since the Group was founded and listed on the Stock Exchange in 2018, the Group's first-hand housing agency services have been the Group's main business segment. Furthermore, the Group has also been providing real estate brokerage network services since 2016.

In response to the downturn in China's real estate industry and the resulting liquidity crunch, the Group drastically cut expenses, focused on implementing cost control measures, repayment of receivables, and continued to operate the remaining business while generating positive cash flow in the current period. The rest of the business is the core business division of the Group and has a long operating history. Even if the scale is reduced, the rest of the business remains continuous, including brand reputation, customer relationships, an experienced core management team, operational expertise, and internal management and control systems to ensure smooth operation. Looking ahead, the Group's strategy is to control the scale and geographical scope of the remaining business according to the industry environment. The industry will only consider and implement expansion if there is a substantial improvement in market sentiment and trading activity. Positive cash flow will be the Group's primary focus and consideration when deciding on the pace of expansion.

The Group has operated and will continue to operate the remaining business (independent of the business that the Group will sell after the restructuring is completed). The Group has been providing real estate agency services since its establishment in 2000, and has been developing real estate brokerage network services since 2016. In contrast, the online digital marketing platform operated by TM Home was only established in 2021. When the Group sells itself to real estate developers, it can provide a range of online and offline services and provide a one-stop service for developers' marketing needs. Within this range, TM Home and Leju complement the rest of the business, but in other respects, the rest of the business is not related, essential, or indispensable. Given the long operating history of the remaining business mentioned above, the unique business model, and the management team responsible for the remaining business independent of the management team responsible for the sales group, there is a clear division between the remaining business and the sales group, and the sales matters will only have a slight impact on the operation of the remaining business of the group.

The company actively discussed with its advisors to develop a restructuring plan that took due account of the circumstances of all stakeholders. Therefore, and to restructure the company's debts (including old notes and convertible notes), the company proposed implementing a new plan. Through the sale, in addition to meeting the cash costs of plan creditors, TM Home's shares will be distributed and issued to creditors for special purposes on the effective date of the restructuring. The company believes this move is a necessary step to facilitate the implementation of the new plan and restructuring.