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[Introduction] Zhongshan State-owned Assets Company Plans to Partly Acquire Lingnan Convertible Bonds That Have Defaulted

China Fund News reporter Jiang You

The first default of state-owned enterprise convertible bonds, Lingnan convertible bonds, has made new progress.Zhongshan Talent Innovation and Entrepreneurship Ecological Park Service Co., Ltd. under Zhongshan State-owned AssetsWe are planning to purchase some Lingnan convertible bonds. The upper limit of a single holder is 1,000 bonds (face value 100,000 yuan), and the purchase price is 100.127 yuan per bond.

Lingnan convertible bonds matured on August 14, with a remaining amount of 456 million yuan at maturity. The issuer Lingnan shares was unable to repay the principal and interest on time. Lingnan convertible bonds have been suspended from trading and conversion, and the last closing price before maturity was 71.372 yuan.

A third-party company intends to partially acquire Lingnan convertible bonds

On August 17, Lingnan convertible bonds and the underlying shares (issued on the date) of Lingnan Shares both disclosed announcements that Zhongshan Talent Innovation and Entrepreneurship Ecological Park Service Co., Ltd. (hereinafter referred to as Zhongshan Talent Innovation Park Company) is planning to acquire part of Lingnan convertible bonds and related rights.

The announcement stated that as of the date of disclosure, this major event was still in the planning stage; there was significant uncertainty as to whether this major event could be carried out smoothly as expected.Lingnan Shares stated that this bond acquisition is a partial acquisition by a third-party entity for holders, which will not affect the assets and liabilities of the listed company, will not cause cash outflow of the listed company, and will not affect the debt repayment ability of the listed company itself.

According to the preliminary acquisition plan, the acquisition targets are Lingnan convertible bond holders as of the close of August 14, 2024. In terms of the acquisition amount, if the bondholders hold no more than 1,000 Lingnan convertible bonds, the acquisition will be based on the total number of bonds they hold; if the number of bonds held exceeds 1,000, a partial acquisition will be made up of 1,000 bonds. The acquisition price is 15% higher than the average closing price of Lingnan convertible bonds for 20 consecutive trading days before August 9, 2024 (including that day) (i.e., RMB 100.127 per bond).

The announcement stated that the specific transaction plan, transaction time, etc. of this acquisition are still under discussion and planning. Investors are requested to pay attention to subsequent announcement information.

The acquirer is also a Zhongshan state-owned asset, and there is no asset restructuring or bankruptcy reorganization plan

Zhongshan State-owned Assets acquired Lingnan Shares through acquisition and voting rights delegation two years ago. Zhongshan Talent Innovation Park Company, which intends to acquire part of Lingnan's convertible bonds, is also a subsidiary of Zhongshan State-owned Assets. However, there is no reorganization or restructuring plan for the proposed acquisition of part of the convertible bonds.

Lingnan shares said that Zhongshan Talent Innovation Park Company will subsequently claim creditor's rights from the company based on the acquired bonds, and there is no plan to conduct major asset restructuring or apply for bankruptcy reorganization of the listed company. Investors are advised to pay attention to risks and invest prudently.

Lingnan Shares stated that since the state-owned assets of Zhongshan Torch District acquired Lingnan Shares in September 2022, in order to actively support Lingnan Shares in its relief efforts, it has subsequently provided Lingnan Shares with a total of 1 billion yuan in loans and 224 million yuan in financing guarantees.

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, and the company has promoted the optimization of its business order structure and strategic layout adjustments, and new orders have not met expectations; the company's engineering business settlement cycle has been lengthened, and the collection of accounts receivable has been delayed. The tight funds have restricted 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, Lingnan Shares achieved operating income of 2.13 billion yuan, a year-on-year decrease of 17.08%; the net profit attributable to shareholders of the listed company was a loss of 1.096 billion yuan, the net cash flow generated by operating activities was -279 million yuan, and the asset-liability ratio reached 85.47%.

On April 30, Lingnan Shares disclosed its 2023 annual audit report. Asia Pacific (Group) Accounting Firm (Special General Partnership) audited the company's 2023 financial report. Taking into account the company's continued losses, heavy debt burden, and overdue debts,The Asia Pacific firm issued an audit report with significant uncertainty regarding going concern。

Lingnan shares fell 1.06% on August 16, closing at 0.93 yuan, with a total market value of 1.57 billion yuan. Lingnan shares' closing price has been below 1 yuan for three consecutive trading days. If the convertible bonds are partially acquired, it may help resolve the bond default.

Editor: Xiaomo

Review: Xu Wen

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