Hi portuser
My apology for not being clear.
I have completed/joined the sentence
"Adjusting the convertible bonds to reflect the full liability" stated in the VIC report pg 27 under Valuation,
with the RMB 365m adjustment to the convertible bonds in pg 28 under Exhibit 18 Asset Based valuation.
Many thanks for going at length to clear my doubt. With your explanation, I understand the maths now. I get it that it pertains to the bond interest to be paid upon bond redemption. What I am confused/puzzled is why are bond interest not been accrued to books at each financial year in the principle of conservatism/prudence should the convertible bond not been converted to equity in the end. Perhaps this got to do with the current accounting standard or acceptable alternative accounting standard, my guess. (No knowledge in this aspect)
In my opinion, a convertible bond is by no mean equity (ie of debt nature), given that it has the option to be redeem, unless it has been converted to equity shares. It ought to be accorded with the same accounting treatment as interest payable on a bank loan.
Above is just my humble view (wishful but more guarded for the less informed).
(23-10-2014, 10:00 PM)CityFarmer Wrote: [ -> ] (23-10-2014, 09:36 PM)portuser Wrote: [ -> ]The report by newman9(VIC) says that “based on 1.5x EV/Sales for the beverage business and the assumption that sales are only 5x overstated (despite evidence suggesting sales could be overstated by 25x or more….”.
If sales were overstated 2x only, Garden Fresh would have incurred huge losses in 2012 and 2013 when the reported sales were halved:
.………………………….……...….....…...…2012.……..2013
Reported sales (RMB m)….........…..865……..1,382
Reported pre-tax profit (RMB m)…..223…………368
Equity of Garden Fresh as at 31 Dec 2011 was RMB86m only. If Garden Fresh has suffered huge losses in 2012 and 2013, its actual equity should be negative now.
Goldman Sach is one of those holding out and it is not aware that the bonds are worthless without any equity backing at all. Can this be the case?
There are two tranches of capital inflow, by CB in 2011 (100 million RMB) and 2012 (270 million RMB), total of 370 million RMB.
(not vested)
The total is smaller, RMB 330m gross.
The first tranche broght in RMB87m gross as the bonds were issued at a 13% discount.
The second brought in RMB 243m gross as the discount was 10%.
Net proceeds were lower, at RMB 320m, after paying professional fees.
If sales had been inflated, huge losses would have been incurred, wiping out the starting equity of RMB 84m and RMB 320m.
And this has not been detected during the ongiong IPO and due diligence by Thai investors?
^^^ It's bit confusing because your figure does not tie with VIC figure of RMB723m based on 1.2X and 1.25X principal amount? Think I need to reread the thread as I remembered the amount is quite huge as a penalty for non listing of Garden Fresh.
(02-10-2014, 02:36 PM)specuvestor Wrote: [ -> ]Strange placement... does this mean Garden Fresh IPO is no more and they are raising cash to pay Goldman?
(03-10-2014, 06:36 PM)Wildreamz Wrote: [ -> ] (03-10-2014, 05:21 PM)[DY] Wrote: [ -> ]Why does the private placement give you added confidence in the accounting?
and yes, the dividend policy would apply equally to everyone.
Thanks. Because buy-side analysts that private investors employ usually do more thorough research, due to their own stake in the investment.
It's interesting when we relook back on our posts when the placement was announced.
Is it possible that TTA was so misled about their beverage business? Actually Goldman not redeeming might not be indicative if they know SinoGrandness does not have capacity to repay. So these are 2 very opposite and conflicting signals. It wold actually be more assuring if SinoGrandness paid Goldman off.
But I feel that the amount being raised is actually prepared and enough to pay off the minority bond holders. Anyone knows what happens if GardenFresh gets listed before June 2015? Is the CB still convertible?
(23-10-2014, 07:44 PM)Max12345678 Wrote: [ -> ]If you read the two VIC reports, there is nothing to lose for bondholders
The company need to pay 20 - 25% interest to the bondholders per year.
If the company closes down, the bondholders are the first to get paid from the sell of the assets of the company.
I hope my above understanding is correct
(23-10-2014, 07:39 PM)Young Investor Wrote: [ -> ]I come across this new posting from Nextinsight.
"About 80.5% of 1st bondholders decided to extend to Jun 2015. Why are they doing this if the company is of concern. Is it significant for the company?"
Hope someone can enlighten the shareholders. Thanks.
Investors need to think for themselves. If a famous fund or a well know group invest in a particular company, it does not mean that everything should be fine. You still have to check the numbers. Can you remember Celestial Nutrifoods. Just check out page 19 of Celestial Nutrifoods 2005 annual report. Google it.
Specuvestor wrote:
“(1) It's bit confusing because your figure does not tie with VIC figure of RMB723m based on 1.2X and 1.25X principal amount? Think I need to reread the thread as I remembered the amount is quite huge as a penalty for non listing of Garden Fresh.
(2) Actually Goldman not redeeming might not be indicative if they know SinoGrandness does not have capacity to repay. So these are 2 very opposite and conflicting signals. It wold actually be more assuring if SinoGrandness paid Goldman off.
(3) But I feel that the amount being raised is actually prepared and enough to pay off the minority bond holders. Anyone knows what happens if GardenFresh gets listed before June 2015? Is the CB still convertible?”
VIC figure of RMB723m (being the sum of RMB 195m and RMB 527m) is wrong.
RMB 195m is compounding RMB 100m three years at 25%.
RMB 527m is compounding RMB 270m three years at 25%.
The interest applicable to the second tranche is 20%, not 25%.
My understanding is that Garden Fresh cannot redeem. The decision to redeem rests with bondholder. If Garden Fresh is listed at a high PER, bondholder converts bonds to Garden Fresh shares and gains more than the redemption amount.
Based on Sino’s announcement, placement money is not for bond redemption.
Thanks portuser. I understand the mechanics of the exchangeable bond
(28-05-2013, 12:24 PM)specuvestor Wrote: [ -> ]Technically the GS bond, as felix pointed out, is not a CB, it is an exchangeable bond GURANTEED by SinoGrand. Either way shareholders of SinoGrand will be marginalised based on the strike price of the exchangeable bond. It is like a credit facility by GS in exchange for pre-IPO entry of Garden Fresh, which traditionally will be priced around like 10% of IPO price.
Are the figures and dates below correct? Sorry if I confused SHK with Goldman tranche. That means what they have just raised RMB260m with 40% earmarked as working capital and RMB60m cash on hand is about nice to repay SHK, and with such coincidental timing to boot?
In any case cash is fungible.
BTW SHK is the one who did the bond deal with Eratat as well.
(07-06-2013, 05:05 PM)portuser Wrote: [ -> ]Redemption penalty
The penalty that Garden Fresh faces is not four times the value of the bonds.
The worst case will result in Garden Fresh redeeming the bonds 73% higher than face value when no effort is made on its listing.
If the listing fails despite effort being made, the redemption will be 52% higher. than face value.
Redemption will be in two stages.
The first redemption of RMB 152m takes place in Sep 2014 for the RMB 100m bonds issued to Sun Hung Kai.
As for the RMB 270m bonds issued to Goldman Sachs, redemption is RMB 411m in Oct 2015.
If Sino Grandness continues to do well, it may be able to redeem the bonds from profit, or from bank borrowings as it becomes more credit-worthy.
Thank you Specuvestor.
You have pointed out the following discrepancies in redemption sums:
……………………………………………....……..My 7 June 13 post……My 23 Oct 14 post:
First tranche CBs ( Sun Hung Kai)……….…RMB 152m………………RMB 195m
Second tranche CBs (Goldman Sachs)…...RMB 411m……………..RMB 467m.
In my 7 June 13 post, I stated:
“If the listing fails despite effort being made, the redemption will be 52% higher. than face value.
Redemption will be in two stages.
The first redemption of RMB 152m takes place in Sep 2014 for the RMB 100m bonds issued to Sun Hung Kai.
As for the RMB 270m bonds issued to Goldman Sachs, redemption is RMB 411m in Oct 2015.
Redemption will be in two stages.
The first redemption of RMB 152m takes place in Sep 2014 for the RMB 100m bonds issued to Sun Hung Kai.
As for the RMB 270m bonds issued to Goldman Sachs, redemption is RMB 411m in Oct 2015.”
Bondholders set three different penalties:
(1) If Garden Fresh makes no effect, it pays 25% annual penalty to Sung Hung Kai and 20% to Goldmans Sachs.
(2) If A1 form is submitted after IPO lead managers have completed their due diligence, Garden Fresh pays both parties 15% annual penalty if the IPO does not material.
(3) If IPO is launched but at PER lower than 9x, 10% annual penalty is paid.
The figures in my 7 June 13 are redemption sums “ if the listing fails despite effort being made ” You will also note that RMB 563m (the sum of RMB 152m and RMB 411m) is “52% higher than face value” of RMB 370m.
By the way, the maturity is Oct 14 for the first tranche (not Sep 14 as stated by me last year), and the second tranche matures in Sep 15 (not Oct 15 as stated in my last year post).
You are right in saying that money is fungible.
Yes, Sino Grandness might have planned to “just raise RMB260m with 40% earmarked as working capital and RMB60m cash on hand is about nice to repay SHK, and with such coincidental timing to boot?”
It will take time for SGX to approve issue of new Sino placement shares, and Thai investors to subsequently apply for approval to remit funds to pay. Sino Grandness should have been aware of this, and could not have made the assumption that the placement money will be available for redemption in Oct.
On 6 Oct 14, Garden Fresh paid RMB 38m to bondholders who wanted their money before the maturity date of 19 Oct 14.
If revenue/sale is inflated, somewhere in the balance sheet will also be inflated because of double entry in accounting.
Are there any corresponding loopholes in the balance sheet?