Sino Grandness

[portuser]

Specuvestor wrote: 
"This thread has provided all the info necessary. You can't say you were ignorant investors. How the cash flows already show the original CB holders' intent. Note that the accumulated interest cost is larger than the original CB which they are still not repaying and somehow happily reducing to smaller stakes of GF. And the US$25m bank loans are secured against the book value US$100m properties PLUS personal guarantee. So much about trust.

Fool me once shame on you. Fool me twice shame on me. They restructured again in July 2017. Fourth or fifth time but who's counting. Always raising capital just before PARTIAL redemption yet they are always "ready" and TTA trust them as much as DBS trust Ezra."



How did you arrive at the US$ 100m (equivalent to RMB 670m) book value of properties being secured against the US$25m (RMB 173m) seven-year DEG loan.

How did you know Mr Huang has provided personal guarantee to the DEG loan? 

If the restructuring on 28 June 2017 is the fourth (or fitfh) as you have claimed, when was the first, second and third?

Thank you. 

[specuvestor]

I'm sure a detailed person like you know the info is all in 2016 AR page 88-89. I know what you are insinuating with my generalization but I presume you know that DEG loan is secured with land and buildings and equipments with carrying amount RMB420m plus TWO corporate guarantees by Shenzhen & SFGI (what do you think is the value of these 2 entities?). This is with ref to a borrowing company with supposedly consolidated RMB3.9b asset and RMB2.4b equity. What a careful bank.

Why don't you do the counting in between when their promise failed since 2014 Oct when they restructured (Or default is better term for you?) to June 2015 and then restructured the CB to EB; and then the latest 1 March 2017 when they defaulted the SB2 & EB and restructured in June from EB to Pref shares. While you are at it the pref shares now carry 7% IRR from the date of the CB issuance, so you can spend time on your spreadsheet calculating to the exact cent how much more "burdensome" it will be if it fails to list again. Their adventures is too numerous for me to spend my limited brain cells on.

Frankly I think I will not waste more time in this thread answering the obvious. The cashflow is obvious for anyone who bothers to think rather than just read. Like I said my main purpose is to inform OPMI, not sophisticated investors who can jolly well eat their own cooking. Instead any OPMI keen on this counter should sit tight and watch the next exciting episode when 2017 annual & AR is announced and Soleado Loan matures in May 2018. I promise it is worth the education. I will however provide a hint that the best possible outcome for OPMI is that it does another China Minzhong.

[portuser]

You stated that "the US$25m bank loans are secured against the book value US$100m properties PLUS personal guarantee." 

As the US$100m does not tally with numbers in page 89 of annual report, and the the same page does not state Mr Huang has given personal guarantee, I thought you may have info from other sources to contradict page 89. 

I note you now say what you gave were generalisation. Seeking clarification is no insinuation. ("I know what you are insinuating with my generalization")

You have stated "While you are at it the pref shares now carry 7% IRR from the date of the CB issuance, so you can spend time on your spreadsheet calculating to the exact cent how much more "burdensome" it will be if it fails to list again. Their adventures is too numerous for me to spend my limited brain cells on."

When the 25% and 20% are reset to 7%, the amount payable at end-Feb 2017 would be RMB 290m, being the sum of:
RMB 69.2m = RMB 48.3m x (1.07) ^ 5.33
RMB 221.1m = RMB 162m x 1.07 ^ 4.6

These are easily obtained from a calculator. 

The RMB 290m is much lower than the RMB 535 EB liability as at end-Feb 2017. 

There were two restructurings, not four or five.

........................................................................................
 
19 Oct 2011 --- issue of 2011 Bonds
25 July 2012 --- issue of 2012 Bonds
19 Oct 2014 --- 2011 Bonds matured. Sang Hung Kai redeemed. CIDB exercised the option (contained in 2011 Bond deeds) to extend to 30 June 2015. Subsequently CIDB extend another 25 days to coincide with 2011 Bonds' maturity date of 25 July 2015.
1 March 2016 --- Both Bonds restructured into SB1, SB2 and EB.
28 June 2017 -- EB to be substituted by preference shares.

[piaopiao]

Specuvestor,

Details and facts are important even to OPMI for them to take calculated risks in investments.

Can be more specific to your statement "The cash flow is obvious for anyone who bothers to think rather than just read."? It will really help OPMI like me who is trying to understand what you, Portuser and others are saying here and make a decision whether to invest in Sino Grandness.

Frankly I am disturbed by your generalisations.

[weijian]

Specuvestor,

Details and facts are important even to OPMI for them to take calculated risks in investments.

Can be more specific to your statement "The cash flow is obvious for anyone who bothers to think rather than just read."? It will really help OPMI like me who is trying to understand what you, Portuser and others are saying here and make a decision whether to invest in Sino Grandness.

Frankly I am disturbed by your generalisations.

Just to add, above "details and facts", i will value common sense above both of them for OPMI. But as d.o.g and many others have mentioned, common sense is really (un)common sense in the market sometimes.

I am an OPMI and issues mentioned by portuser and specuvestor has mentioned are quite obvious to me. I don't find anything disturbing from either of them.

As for your question to specuvestor (just in case he doesn't reply), let me refer to Boon's table below for a start. You can subsequently look at the way the restructurings, the new loans and the rights issue were done.

https://www.valuebuddies.com/thread-3371...#pid125427

[piaopiao]

Specuvestor,

Details and facts are important even to OPMI for them to take calculated risks in investments.

Can be more specific to your statement "The cash flow is obvious for anyone who bothers to think rather than just read."? It will really help OPMI like me who is trying to understand what you, Portuser and others are saying here and make a decision whether to invest in Sino Grandness.

Frankly I am disturbed by your generalisations.

Just to add, above "details and facts", i will value common sense above both of them for OPMI. But as d.o.g and many others have mentioned, common sense is really (un)common sense in the market sometimes.

I am an OPMI and issues mentioned by portuser and specuvestor has mentioned are quite obvious to me. I don't find anything disturbing from either of them.

As for your question to specuvestor (just in case he doesn't reply), let me refer to Boon's table below for a start. You can subsequently look at the way the restructurings, the new loans and the rights issue were done.

https://www.valuebuddies.com/thread-3371...#pid125427

I find disturbing because there were specific numbers and facts but Specuvestor chose to generalise.

For example, Specuvestor mentioned that the USD 25 mil DEG loan was secured on USD 100 mil properties and personal guarantee by Chairman Huang when he has not bases. Another example, there were only 2 restructuring exercises on the bonds but Specuvestor said there were 5. If these are true, I would have lost faith in Huang's abilities and start to write off Sino Grandness.

I am glad that there were knowledgeable forummers who chose not to keep quiet and clarified. This is the value of Valuebuddies.

As for Boon's post, I will take a look later but I might have seen it before.

[specuvestor]

Since Portuser is clarifying, yes I was generalising on the loans rather than type a whole list... note I used the words "bank loans" which is a continuation of what we had already discussed and the context that we are pointing to the same thing
https://www.valuebuddies.com/thread-3371...#pid143044

Neither did I mention corporate guarantees, bank balance pledges, factory & warehouse as security etc etc nor are all bank loans US$25m. Neither did I mention DEG loan, that's not my strawman. So US$100m is an understatement? Seriously its all there in the AR for all to see AND THINK why the banks are so careful about SFGI. Which other companies are the banks so careful? I can name Noble and O&G companies

I would also suggest Portuser do your calculation based on Sep 2018 9% IRR before saying much lower again. I've pretty sick of hearing this "much lower" argument every step of the restructuring. And yes probably they will do the accounting gimmick of posting paper gains until it gets reversed again.

And since Portuser have done the counting, let me add some info off the top of my head into the chronology he presented, and no I can't be bothered to look back the details but do alert if the details is incorrect but I'm pretty sure the truth is correct:

19 Oct 2011 --- issue of 2011 zero coupon convertible Bonds
25 July 2012 --- issue of 2012 zero coupon convertible Bonds
Reason why "zero" is important is because they need to pay ZILCH until it matures. There is no cashflow. Reason why "convertible" is important because it is based on the HOPE that GF will get listed to pay off these "burdensome" debt.

19 Oct 2014 --- 2011 Bonds matured. Sun Hung Kai redeemed 19.5%. If the redemption exceeds 20% all the holders will be redeemed at the same time. So are the holders more confident than SHK or they know they can't get the money even if they redeemed?. CIDB exercised the option (contained in 2011 Bond deeds) to extend to 30 June 2015. Subsequently CIDB extend another 25 days to coincide with 2011 Bonds' maturity date of 25 July 2015. After 2 extensions still non-payment ie default

1 March 2016 --- Both Bonds restructured into Straight Bond 1 SB1, Straight Bond 2 SB2 and Exchangeable Bond EB. Why Straight bonds is important cause they have first call on the firm's asset to file for bankruptcy proceedings against SFGI which is why they are so motivated to pay off the straight bonds... raising Soleado Loans to pay off SB1 and rights issue to pay off SB2 (which there is no notice yet but pretty sure it will be done with the rights money, but the rights money couldn't pay the ballooning EB ie defaulted again) EB is essentially the crystalisation of the interest owed from 2011 and 2012 convertibles. So net net the CB holders already got back their capital.

28 June 2017 -- EB to be substituted by preference shares with another hope of IPO in 15 months. With such track records as above, all the best to the faithful. IMHO the CB holders are just holding a lottery mentality.

I for one think if you defaulted and delayed payment it is called restructured loan, regardless if there is an agreement. You can ask your banker.

And if Piaopiao who has been watching this thread for past 2 years finds my posts disturbing instead of the continued restructuring (as if 2 is better than 4 or 5) and capital calls, I am flattered but also conclude we have different notion of what is important and critical vs what is accounting 101 on paper.

I don't teach accounting 101.

[portuser]

Specuvestor

I set out the chronology to show that there were only two restructurings, not four or five stated by you. 

You have stated that bondholders had no alternative but to extend the bonds each time. You may be right or wrong. I only presented facts from official sources.   
  
You wrote:
"If the redemption exceeds 20% all the holders will be redeemed at the same time." 

Where can I find this in the 2011 Bond deed?

You also wrote:
"I would also suggest Portuser do your calculation based on Sep 2018 9% IRR before saying much lower again. I've pretty sick of hearing this "much lower" argument every step of the restructuring. And yes probably they will do the accounting gimmick of posting paper gains until it gets reversed again."

EB liability as at 28 Feb 2017.......RMB 535m
25% and 20% reset to 7%..........RMB 290m
25% and 20% reset to 9%..........RMB 333m

It is a fact that the resetting will lower financial burden. Why should you be "pretty sick of hearing this "much lower" argument every step of the restructuring"?  

Finally, your statement that "the US$25m bank loans are secured against the book value US$100m properties PLUS personal guarantee" specifically referred to the US$25m loan, which was granted by DEG.  

You should be capable of writing it correctly if you had intended to refer to all loans.

[specuvestor]

You know what I meant

As per my post above the exchangeable bonds burden of RMB534.74m is a pre-IPO bet gone awry consisting mainly of the compounded high interest cost of the 2 CBs over these 5 years. It would be better if the burden is not the OPMI's burden.

As for cash, they generate RMB1.5b operating cashflow last 2 years. Except they didn't repay the loan yet only repay SB1 coincidentally after Convertible Loan from Soleado and SB2 after this rights issue. Obviously the high growth is worth more than RMB534.74m so no complains.

Looks like my assumption was wrong. They didn’t even use the rights cash to repay SB2, citing the standard s-chip SAFE excuse to further delay till Jan 2018. More champion than I thought.

So.... is this considered another restructuring or no count as friendly delay because the SB2 holders trust them so much?

Pointing out the obvious, with RMB567m cash they have RMB451k interest for the quarter, while paying RMB8m interest cost cash to banks.

[portuser]

Specuvestor

I asked on 3 Oct the basis of your statement:
"If the redemption exceeds 20% all the holders will be redeemed at the same time." 

Can you respond, please?

As background to others, Sun Hung Kai redeemed 19.5% of 2011 bonds. Specuvestor's point was that if it had more than 20%, the other holder of 2011 bonds would have the rights to redeem together with Sun Hung Kai.