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Text/Edited by Wutong Xiao

On the evening of August 14, Lingnan Ecological Culture and Tourism Co., Ltd. (002717) issued an announcement that the "Lingnan Convertible Bond" could not be redeemed on time. As of August 13, 2024, the remaining amount of the "Lingnan Convertible Bond" was 489.535 million yuan. The company's existing monetary funds were unable to repay the "Lingnan Convertible Bond", and the "Lingnan Convertible Bond" could not be redeemed on time. The original delisting date of the "Lingnan Convertible Bond" was August 15, 2024. Now, because the "Lingnan Convertible Bond" cannot be redeemed on time, it will not be delisted from the Shenzhen Stock Exchange.

In the above situation, the company has provided guarantee for "Lingnan Convertible Bond" by increasing assets. However, the realization of credit enhancement assets is uncertain, so investors are advised to invest rationally. The actual controller of Lingnan shares is the Management Committee of Zhongshan Torch High-tech Industrial Development Zone. Therefore, "Lingnan Convertible Bond" has become the first convertible bond of a state-owned listed company in my country to default on repayment, thus breaking the "belief in the rigid repayment of state-owned assets" in the convertible bond market!

Reasons why the company cannot repay the convertible bonds on time

In recent years, due to the impact of cyclical fluctuations in the industry and changes in market supply and demand, government investment has been reduced, the company has promoted the optimization of business order structure and strategic layout adjustments, and new orders have not met expectations; the settlement cycle of the company's engineering business has been lengthened, the collection of accounts receivable has been delayed, and tight funds have constrained the construction progress of the company's projects under construction; coupled with the need to maintain daily operating expenses, the company's asset-liability ratio is high, profitability and debt repayment ability continue to decline, and there is liquidity pressure. In 2023, the company's total operating income decreased year-on-year; the company's operating income mainly came from ecological environment construction and restoration business and water affairs and water environment governance business, which together accounted for more than 95.00% of operating income. In 2023, the company achieved operating income of 2.13 billion, a year-on-year decrease of 17.08%, and realized a net loss of 1.096 billion yuan attributable to the parent company, a net cash flow of -279 million yuan from operating activities, and an asset-liability ratio of 85.47%. On April 30, 2024, the company disclosed its 2023 annual audit report. Asia Pacific (Group) Certified Public Accountants audited the company's 2023 annual financial report. Taking into account the company's continued losses, heavy debt burden, and overdue debts, Asia Pacific Certified Public Accountants issued an unqualified audit report with significant uncertainty of going concern. After the company's self-examination, the current available monetary funds are unable to repay the principal and interest of the "Lingnan Convertible Bond".