14-04-2016, 07:03 PM
(14-04-2016, 05:57 PM)crubs Wrote: [ -> ]specuvestor,
On page 23 of the 2012 CB, it states
So long as any Convertible Bond remains outstanding, save with the approval of an Extraordinary Resolution, the HK Issuer and/or any of its subsidiaries (and in the case of (i) and (xii) below, the Company):
(iv) will not make any Capital Distributions (as defi ned below) to the holders of its equity or debt securities;
On page 26, "Capital Distribution" is defined as
“Capital Distribution ” means any dividend or distribution (whether of cash or assets in specie) or other property (whenever paid or made and however described) (and for these purposes a distribution of assets in specie includes without limitation an issue of shares or other securities credited as fully or partly paid) by way of capitalisation of reserves and including any Scrip Dividend to the extent of the Relevant Cash Dividend.
Since Garden Fresh is a separate entity with separate accounts, the only way Grandness would receive cash would be by dividends. As long as the CBs are in effect, no profits made by GF are allowed to be distributed. This was also why dividends to shareholders in 2015 comes from the profits of Grandness alone.
CB holders are invested only in GF, so it is in their interest to prevent the management from using GF profits for other purposes.
The new bond agreement made no mention of this clause, therefore it is assumed to be status quo.
On page 51 of the 2015 Annual Report the company states that as a group as at 29th Feb 2016,
1) They have cash balance of RMB233.1m
2) Untapped banking facilities of approximately RMB273.6m
Of the cash balance and banking facilities, we do not know how much of it belongs to GF and Grandness respectively. It would be helpful to clarify with the management.
On top of that Grandness would have capex requirements for its Anhui Plant under the company Grandness (Anhui) Foods Co. Ltd.
If sales is picking up, additional funds will be needed for working capital and advertising expense
Lastly, the CB redemption. (I do not know whether GF or Grandness is responsible for the 31st May payment)
I do not have the cashflow forecast for Grandness but if sales are doing well, the company might genuinely need the funds.
Crubs
I think this is one of your finer posts: reasonable and concise. If I don't know better I would think it is 2 persons behind this ID
Fair enough to say that the EB require them to have special resolution. Do you think that is easier or EGM with personal guarantee is easier?
Secondly this EB restriction would not have applied till this day if it has been redeemed. Like I always tell my children: you can choose your actions; but you cannot choose your consequences. It's a baggage of the past that haunts today.
If I remember correctly the SB1 is borne by the new GF entity hence the "restructuring"
It's a good suggestion to ask management this AGM why Grandness can't tap the lines and if it has been profitable, it should have internal reserves for expansion since it didn't pay dividend until this year.
(14-04-2016, 03:01 PM)chan99 Wrote: [ -> ](14-04-2016, 02:00 PM)specuvestor Wrote: [ -> ]Err yes so your point is that GF shouldn't pay dividends to shareholder?
So you are saying GF has the ability to pay $20 Mln in dividends? I thought you were doubting the fundamentals of SinoG in the first place!
GF is a growing company & it needs cash to fund its own growth. I am sure it will take some sort of financing, whether from a bank or otherwise to fund its own growth in the first place. That being the case I don't foresee GF paying high dividends to SH's. Moreover we are talking about $20 Mln here for the growth of the canned business which it needs now. A dividend one year later is of no use in any case.
If GF can pay the $20m dividend, that doesn't take one year, which on the books looks like they can... then all doubts on SB1 is cleared. Actually bottomline is simply show us the money and I would be the first to shut up. Fund raising obviously doesn't count as internally generated cashflow.
You are new in the forum but I have been saying in the past (not this thread) there is a difference between a company that does capital return say $10m and then rights issue $30m versus another that simply does rights issue $20m. Textbook wise it might be the same but cashflow wise it is very different because at the minimum it has shown us it has $10m cash to pay out. That's how we look at the structure and cashflow. Ezra is a good example of a high profit (before recent crisis which we also warned) low cashflow company.
