Sino Grandness

[crubs]

Specuvestor,

You said : "I specifically used the word default because that is what I had stated clearly in the previous discussion. If the bond had been rated, the rating agencies are not going to wait for them to issue an announcement to declare it default post grace period. Makes no sense that you keep insisting a borrower has the right "not to default" just because it doesn't issue a statement? The so-called statement you cling on to is required by SGX for material information. The information has however happened. You might want to read the portion in the AP on "Event of Default" whether that includes announcements."

So according to you Sino Grandness "Defaulted" and did not make an announcement because it is not deemed as material information by SGX ?

I cling on to facts and not hypothetical situations such as "IF the bond had been rated". If everything is based on hypothetical situation, anyone can massage the issues to suit their opinion.


You said : "It is true that the borrower did not issue a legal claim on the default or demanded redemption (as per portuser). I've never disputed the fact so please don't build a strawman. That doesn't mean it is not in default but it means creditors are not pursuing it legally. That's why it is called "restructuring" not "refinancing". 

1) as above, it they "defaulted" ? Why didn't SGX require them to make an announcement ? 
2) Ausgroup announced a default which stated that they are "restructuring". The point is restructuring or not, as long as there is a default, SGX regulation requires them to announce it.
I'm not building a strawman. If there's a default, it is material information and SGX would require Sino Grandness to announce it, that's all. I said "Sino Grandness made no announcement which stated that it defaulted" clearly my issue is with the term default. Don't confuse people by saying I'm debating about something else.


You said : "Please also refer when did they issue statement claiming they were in discussion BEFORE the payment dates of Sept 2014 and July 2015 (not the extended date of June 2015). Management had said in 2015 AGM they were going to fully repay the creditors... what discussions?""

Management did make the announcements as portuser mentioned, and they have continued stating that they are in discussions every quarter. do your homework.

You said : "Technically it has always been an EB cause the issuing party is not necessarily the listco. That's why nobody converts cause nobody know for sure which is the listco."

So specuvestor thinks that everyone including all professionals/bankers/auditors involved in the CBs since 2011 is technically wrong and he got it right.   Interestingly, you yourself used the term CB before the restructuring.

[specuvestor]

Don't be surprised portuser. I'm not the one in love with the stock nor do I snake around the topic. I seriously don't remember this announcement 10 months ago. I also don't have recollection that as crubs say "they have continued stating that they are in discussions every quarter" until 1 March 2016. Maybe you guys can point out other further announcements

Dividends cannot be paid when debts to bondholders, who are Sino Grandness' creditors, are not honored.

This recent statement is for example false because you can't identity the different entities for different cashflows. But I don't say I'm surprised you didn't know that.

So FOUR days before date due they issued this statement for RESTRUCTURING when they said they will be paying full during AGM, which with their cash hoard they should be of greater bargaining power, for example pay back first then reissue bonds. That was what even Noble does and is called REFINANCING. It would not affect their lump sum capex end of year either if they can get refinancing. Fact is cashflow wise they paid nothing. Everything is accrued until it is changed into a SB which basically means creditors want to see cashflow.

However if they could not get restructuring guess which day will be the date of default be deemed? Not 1 March 2016.

Crubs please make sure you do your homework and know what is an EB vs a CB. That's why I have been saying technically it is an EB and yes actually MOST of the time I conveniently followed the common convention to call it CB, but in few instances I have stated it is an EB to highlight the difference in entities, which obviously not even you are aware that consolidated is not the same as holdco.

[crubs]

If Sino Grandness "defaulted" why didn't SGX require them to make an announcement given that it is material information ? 


You said:
"However if they could not get restructuring guess which day will be the date of default be deemed?"
"If the bond had been rated, the rating agencies are not going to wait for them to issue an announcement to declare it default post grace period"

You seem to have a lot of hypothetical scenarios, all of which did not take place.

It was a CB previously because the issuer "HK Issuer" the bonds which were convertible into shares of the "HK Issuer". 
It is a EB now because post restructuring, the bonds issued by the issuer is convertible into share of ANOTHER holding company.

[specuvestor]

It was announced. It was the 4 days prior announcement that portuser pointed out that they are restructuring. I'm not about to go into a tirade with you on "restructuring" vs "default" unless you know how these things are understood

Yes I guess a lot based on what the management say, what the cashflow say, vs what they actually do, and of course what the real world will treat it. If it is hypothetical of no relevance you shouldn't care too much about it, except for the series of post July 2015 events, which SFGI could have easily avoided with the cash hoard. In case you missed it, prior to that the company looks interesting to me. But facts changed.

Do you know who was the "HK issuer" and what entity does the "CB" holders wants to hold when they convert, hence my statement: "That's why nobody converts cause nobody know for sure which is the listco"? The "CB" holders wants to exchange for the share of the listco, not the HK issuer, which turns out to be the case.

[crubs]

So you're saying the announcement of restructuring equates to an announcement of "default", even though it was announced 4 days before the actual due date. First time I hear a company announce "default" even before it actually defaulted.

Any now you claim you know more than me and you don't have to elaborate.

They wanted shares in the listco which was unknown so in the initial CB document it was tentatively convertible into shares of the "HK Issuer" temporary or not, at that point of time its a CB.

[portuser]

Specuvestor wrote:
"I seriously don't remember this announcement 10 months ago. I also don't have recollection that as crubs say "they have continued stating that they are in discussions every quarter" until 1 March 2016. Maybe you guys can point out other further announcements"

The three statements issued subsequent to the 22 July 2015 announcement are reproduced at the end of this post. Each of them reported ongoing negotiation with bondholders. 

You contended that my following statement is false:

Dividends cannot be paid when debts to bondholders, who are Sino Grandness' creditors, are not honored.

This statement is true because Sino Grandness guarantees the payment due 31 May 2016. 

You also stated "So FOUR days before date due they issued this statement for RESTRUCTURING when they said they will be paying full during AGM, which with their cash hoard they should be of greater bargaining power, for example pay back first then reissue bonds."

The AGM your referred is the one held in April 2015. 

Page 50 of 2014 annual report (presented for the AGM) set out the measures to taken to deal with possible bond redemption.

Among them are the following two:

- the management may negotiate with the convertible bondholders for partial redemption and/or extension; and

- while continuing to move ahead with its plan with the Proposed IPO, the Group’s management will also actively monitor and manage its cash flow positions, banking facilities, trade receivables and capital investment plans. If required, the senior management shall reduce investment sums or postpone its capital investment plans in the new plant in Anhui Province in order to further strengthen its cash flow position.

As I have said several times before, not only the construction of the Anhui plant has not slowed down, several projects were initiated in 2015. These projects will improve the investment merits of Garden Fresh for IPO.

Embarking on the huge RMB 707m capex in 2015 was possible only if bondholders had given the assurance that there would be no full redemption.  

.....................................................................................................................................................................
12 Aug 2015 

Subsequent to our announcement on 22 July 2015, the Company had concluded discussion with CB1 and CB2 bondholders who had agreed to the extension of the maturity date. We are in the process of finalizing the legal documentation.

12 Nov 2015
The Company also wishes to update that subsequent to our previous announcement dated 12 August 2015, the Company and the CB1 and CB2 bondholders has entered into further discussions in relation to the terms and details of the extension of the convertible bonds which is still on going.

26 Feb 2016 
The Company wishes to update that it is still engaged in discussions to finalize details of the extension with bond holders of the 0% RMB100,000,000 convertible bonds due 2014 (“CB1”) and RMB270,000,000 convertible bonds at zero coupon rate due 2015 (“CB2”) which were issued by Garden Fresh (HK) Fruit & Vegetable Beverage Co., Limited, a wholly-owned subsidiary of the Company. The Company will keep shareholders updated on material developments relating to the CB1 and CB2 as and when appropriate.

[budgetier]

Good morning,

The recent posts on convertible bonds are interesting.

Depositor is required to give notice to the bank before his fixed deposit matures. I wonder whether bondholders are required to notify Garden
Fresh, likewise, before the bond maturity date?

Thank you.

[portuser]

Budgetier

The announcement dated 9 October 2014 (reproduced at the end of this post) on 2011 convertible bonds may shed some light.

2011 convertible bonds, which expired on 19 Oct 2014, allowed "bondholders to direct the HK Issuer [Garden Fresh] to extend the scheduled Maturity Date of 19 October 2014 to 30 June 2015 by delivery of an extension notice..... not less than thirty business days and not more than forty business days prior to 19 October 2014".

You will note that Sino Grandness Food Industry paid RMB 37.9m (inclusive of RMB 18.4m interest) on 6 Oct 14, 13 days before the due date of 19 Oct 14.

It is the duty of DBS, the IPO sponsor, to report lapses and non-compliance. It is foolhardy to improperly administer the convertible bonds.  

.......................................................................................................................................................................................................
Announcement dated 9 October 2014.   

............... the Board of Directors (the “Board”) of Sino Grandness Food Industry Group Limited (the “Company”) wishes to announce that, Bondholders representing 80.5% of the principal amount of the Convertible Bonds have indicated that they intend to exercise their right to extend the Maturity Date of the Convertible Bonds from 19 October 2014 to 30 June 2015...........................................

In addition, the Company also wishes to announce that it is in the process of repurchasing the remaining 19.5% of the principal amount of the Convertible Bonds (the “Repurchase”). Payment for the Repurchase in the total amount of approximately RMB37.9* million was made on 6 October 2014...

[specuvestor]

Budgetier I don't think it is required by law to inform the borrower, but administratively the custodian would do a pre-advise usually. But with so few SFGI lenders I don't think the bonds are custodised. That's how usually bondholders know if the money is in full for all the borrowers, and not selectively. If it is partial payment the custodian / agent bank will have to determine the apportioning.

So you're saying the announcement of restructuring equates to an announcement of "default", even though it was announced 4 days before the actual due date. First time I hear a company announce "default" even before it actually defaulted.

Any now you claim you know more than me and you don't have to elaborate.

Then there's a lot of "first time" for you . Rating agencies sends out credit watch or downgrades even before the due date. There are companies that simply say they won't pay or cant' pay ahead of maturity. That doesn't mean they have not defaulted when the date comes just because they declare they can't pay / or they are restructuring? Did Argentina default even when they had cash to pay? You can read about the interesting saga of Shanshui Cement (where it defaults primarily due to takeover battle) or Kaisa (where local and overseas debtor are treated differently though legally they are not) where there's ample literature.

SFGI announced it is "restructuring"... that's already material. Why would I need to elaborate since it is clear to you that default doesn't happen until it is announced.

You contended that my following statement is false:

Dividends cannot be paid when debts to bondholders, who are Sino Grandness' creditors, are not honored.

This statement is true because Sino Grandness guarantees the payment due 31 May 2016. 

You also stated "So FOUR days before date due they issued this statement for RESTRUCTURING when they said they will be paying full during AGM, which with their cash hoard they should be of greater bargaining power, for example pay back first then reissue bonds."

The AGM your referred is the one held in April 2015. 

Page 50 of 2014 annual report (presented for the AGM) set out the measures to taken to deal with possible bond redemption.

Among them are the following two:

- the management may negotiate with the convertible bondholders for partial redemption and/or extension; and

- while continuing to move ahead with its plan with the Proposed IPO, the Group’s management will also actively monitor and manage its cash flow positions, banking facilities, trade receivables and capital investment plans. If required, the senior management shall reduce investment sums or postpone its capital investment plans in the new plant in Anhui Province in order to further strengthen its cash flow position.

As I have said several times before, not only the construction of the Anhui plant has not slowed down, several projects were initiated in 2015. These projects will improve the investment merits of Garden Fresh for IPO.

Embarking on the huge RMB 707m capex in 2015 was possible only if bondholders had given the assurance that there would be no full redemption.  

SFGI is the guarantor. This contingent liability only triggers if Garden Fresh HK fails to pay and the creditors issue a demand of payment to SFGI. This is not likely to happen within 6 days from 31 May. In this case they are not in breach of anything even if SB1 defaults, which I had stated to be unlikely (that they have such audacity, unless forced by creditors). But still it will give us some indication on the cash worthiness of their 2015 year end cash balance.

The restructuring took SEVEN months after the bondholders "gave assurance"? As I have also said several times before, why is refinancing not an option rather than "because of year end capex"?

Lovers just thinking of what a good deal to SFGI. I'm thinking of what I would do if I am the bondholder.

[portuser]

Specuvestor wrote:
"The restructuring took SEVEN months after the bondholders "gave assurance"? As I have also said several times before, why is refinancing not an option rather than "because of year end capex?"

I do not know whether seven months were too long or too short when five bondholders were involved.

The likely objectives of Sino Grandness were to reduce the aggregate equity stake of bondholders in Garden Fresh, and to have a repayment schedule that does not strain cash flows. 

We do not know whether refinancing had been contemplated or attempted.