Risk of bondholders seeking early redemption of convertible bonds
By LYNETTE KHOO 24 March 2009
Celestial NutriFoods’ external auditors have drawn attention to the possibility of bondholders seeking early redemption of their $235 million convertible bonds, which could have a bearing on its going concern status.
According to FY2008 financial statement notes which PricewaterhouseCoopers LLP referred to, although the bonds will mature only on June 12, 2011, the bondholders may exercise their put options on June 12 this year to require early redemption at a gross yield of 5.2 per cent per annum, calculated on a semi-annual basis.
Total redemption amount needed, assuming all bondholders exercise their options, was estimated at some $274 million.
Without qualifying its opinion, PricewaterhouseCoopers LLP said in an ‘emphasis of matter’ in its March 20 independent audit report: ‘If all the holders of the bonds exercise their options to early redeem the bonds and the additional financing is not forthcoming, the group may be unable to continue in operational existence for the foreseeable future.
‘If this happens, adjustments would have to be made to reflect the situation that the assets need to be realised other than in the normal course of business and at amounts which could differ significantly from the amounts stated in the balance sheets in the group as at Dec 31, 2008.’
Celestial, a maker of soy protein-based products, may also have to provide for further liabilities which may arise and to classify the non-current assets as current assets.
Celestial plans to finance the potential early bond redemption through external borrowings as its total contracted and uncontracted capital expenditures amounted to 529.13 million yuan (S$117 million) and 188.98 million yuan respectively.
‘The group is in the midst of negotiations with several financial institutions on various options to obtain refinancing,’ a Celestial spokesman told BT yesterday, but declined further details.
It will also mull the possibility of dissuading bond- holders from early redemptions, depending on the outcome of the refinancing discussions, he added.
JP Morgan was the sole bookrunner and lead manager, while HL Bank was the co-manager of the bond offering.
As at Dec 31, 2008, Celestial’s current liabilities exceeded its current assets by 63.52 million yuan, after including the CBs as current liabilities.
It had total cash and cash equivalents of 811.87 million yuan. The group did not propose any dividend for fiscal 2008.
Celestial’s net profit for the full year ended Dec 31, 2008, rose 19 per cent to 499.2 million yuan. But in the fourth quarter, net profit slipped 26 per cent to 96.88 million yuan.
Earlier this month, its group financial controller Tam Ching Ho resigned ‘to pursue other interests of career’ and was replaced by Hu Xiangang, who was group financial controller at Inner Mongolia Melic Sea High-tech Group Company.
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Celestial auditors highlight going concern issue
Risk of bondholders seeking early redemption of convertible bonds
By LYNETTE KHOO
24 March 2009
Celestial NutriFoods’ external auditors have drawn attention to the possibility of bondholders seeking early redemption of their $235 million convertible bonds, which could have a bearing on its going concern status.
According to FY2008 financial statement notes which PricewaterhouseCoopers LLP referred to, although the bonds will mature only on June 12, 2011, the bondholders may exercise their put options on June 12 this year to require early redemption at a gross yield of 5.2 per cent per annum, calculated on a semi-annual basis.
Total redemption amount needed, assuming all bondholders exercise their options, was estimated at some $274 million.
Without qualifying its opinion, PricewaterhouseCoopers LLP said in an ‘emphasis of matter’ in its March 20 independent audit report: ‘If all the holders of the bonds exercise their options to early redeem the bonds and the additional financing is not forthcoming, the group may be unable to continue in operational existence for the foreseeable future.
‘If this happens, adjustments would have to be made to reflect the situation that the assets need to be realised other than in the normal course of business and at amounts which could differ significantly from the amounts stated in the balance sheets in the group as at Dec 31, 2008.’
Celestial, a maker of soy protein-based products, may also have to provide for further liabilities which may arise and to classify the non-current assets as current assets.
Celestial plans to finance the potential early bond redemption through external borrowings as its total contracted and uncontracted capital expenditures amounted to 529.13 million yuan (S$117 million) and 188.98 million yuan respectively.
‘The group is in the midst of negotiations with several financial institutions on various options to obtain refinancing,’ a Celestial spokesman told BT yesterday, but declined further details.
It will also mull the possibility of dissuading bond- holders from early redemptions, depending on the outcome of the refinancing discussions, he added.
JP Morgan was the sole bookrunner and lead manager, while HL Bank was the co-manager of the bond offering.
As at Dec 31, 2008, Celestial’s current liabilities exceeded its current assets by 63.52 million yuan, after including the CBs as current liabilities.
It had total cash and cash equivalents of 811.87 million yuan. The group did not propose any dividend for fiscal 2008.
Celestial’s net profit for the full year ended Dec 31, 2008, rose 19 per cent to 499.2 million yuan. But in the fourth quarter, net profit slipped 26 per cent to 96.88 million yuan.
Earlier this month, its group financial controller Tam Ching Ho resigned ‘to pursue other interests of career’ and was replaced by Hu Xiangang, who was group financial controller at Inner Mongolia Melic Sea High-tech Group Company.
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