Guangzhao Industrial Forest Biotechnology Group has been given a grace period - its convertible bondholder has extended the deadline for it to repay the total outstanding in full and agreed not to enforce its rights until June 9.
But this extension is subject to full and timely compliance by Guangzhao IFB with the terms of the extension.
The group has defaulted on US$8 million worth of convertible bonds issued to a Goldman Sachs subsidiary Liberty Harbor LLC last September after the collective stakes of its chairman and CEO fell to around 31.8 per cent as a result of forced-sale of their pledged shares.
They had pledged shares for an undisclosed sum of personal loans.
This change in controlling stakeholding constituted a default under the convertible bond agreement with Liberty Harbor, giving the noteholders the right to call for the redemption. But the group does not have enough financial resources to repay such unscheduled redemptions in full.
Shares of Guangzhao have since been suspended from trading due to the CB default and to avoid the margin calls on pledged shares.
Its chairman Su Min, however, had assured shareholders that they have a plan that has the support of all parties, including Liberty Harbor.
The group plans to inject an asset owned by CEO Song Xuemeng and Ms. Su into the group in a related party transaction. This is a high quality fertiliser project that would boost Guangzhao’s business as its poplar products have taken a hit from lower packaging as exports and construction projects slump.
The second option is to expedite its logging schedule in Jiangxi, where the process was delayed by a snowstorm last year.
Last month, Guangzhao IFB said it has commenced logging of its poplar plantations at Shandong Province on Feb 25. The harvest of 5,000 mu (333 hectares) land will continue until end of May.
From June 2009 onwards, Guangzhao plans to log the 18,000 mu (1,200 hectare) pine forest land in Jiangxi Province that the group had acquired in 2006. The group plans to commence larger-scale logging at its 40,000 mu (2,667 hectares) poplar plantations in Hubei, Anhui and Shandong provinces in the fourth quarter.
These logging activities will contribute positively towards its cashflow this year.
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Bond payment extension for Guangzhao IFB
Bondholder not enforcing its rights until June 9
By LYNETTE KHOO
14 May 2009
Guangzhao Industrial Forest Biotechnology Group has been given a grace period - its convertible bondholder has extended the deadline for it to repay the total outstanding in full and agreed not to enforce its rights until June 9.
But this extension is subject to full and timely compliance by Guangzhao IFB with the terms of the extension.
The group has defaulted on US$8 million worth of convertible bonds issued to a Goldman Sachs subsidiary Liberty Harbor LLC last September after the collective stakes of its chairman and CEO fell to around 31.8 per cent as a result of forced-sale of their pledged shares.
They had pledged shares for an undisclosed sum of personal loans.
This change in controlling stakeholding constituted a default under the convertible bond agreement with Liberty Harbor, giving the noteholders the right to call for the redemption. But the group does not have enough financial resources to repay such unscheduled redemptions in full.
Shares of Guangzhao have since been suspended from trading due to the CB default and to avoid the margin calls on pledged shares.
Its chairman Su Min, however, had assured shareholders that they have a plan that has the support of all parties, including Liberty Harbor.
The group plans to inject an asset owned by CEO Song Xuemeng and Ms. Su into the group in a related party transaction. This is a high quality fertiliser project that would boost Guangzhao’s business as its poplar products have taken a hit from lower packaging as exports and construction projects slump.
The second option is to expedite its logging schedule in Jiangxi, where the process was delayed by a snowstorm last year.
Last month, Guangzhao IFB said it has commenced logging of its poplar plantations at Shandong Province on Feb 25. The harvest of 5,000 mu (333 hectares) land will continue until end of May.
From June 2009 onwards, Guangzhao plans to log the 18,000 mu (1,200 hectare) pine forest land in Jiangxi Province that the group had acquired in 2006. The group plans to commence larger-scale logging at its 40,000 mu (2,667 hectares) poplar plantations in Hubei, Anhui and Shandong provinces in the fourth quarter.
These logging activities will contribute positively towards its cashflow this year.
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