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Friday 12 June 2009
Celestial NutriFoods in a bind
It announces that it is unable to pay $274m to bondholders by today Celestial's executive chairman and chief executive Ming Dequan holds 28.37 per cent of the company, according to Bloomberg data.
It announces that it is unable to pay $274m to bondholders by today
Yang Huiwen 12 June 2009
Yet another S-chip company is on the rack: Celestial NutriFoods faces a near- impossible demand to pay $274 million to bondholders by today’s deadline.
Celestial’s crisis comes in the wake of a series of financial woes, accounting irregularities and scandals at S-chips -China-based firms listed on the Singapore Exchange - and raises concerns about the sector’s standard of governance.
China EnerSave, Sino-Environment Technology Group and Ocean International are among firms that have been flagged by auditors.
Investors have sold down S-chips over recent months and yesterday’s news about a once-feted company will only further weaken sentiment.
In a statement to the SGX yesterday, Celestial admitted that it will ‘not be in a position to meet its payment obligations...to the bondholders’.
Merrill Lynch has been appointed to help review the firm’s operations and to restructure or repurchase the bonds. It will also help to negotiate with bondholders, who demanded on May 23 that the China-based producer of soyabean food and beverages repay the bonds.
Celestial has pressed on with fund- raising, which began early last year, but it warned that it was ‘not optimistic’ about obtaining new funding by the due date.
It said on May 25 that it could not pay up ‘based on the funds currently available to the company outside the PRC and after considering its working capital requirements in the PRC’.
It added that it may have to undertake more borrowing or issue new shares to pay the bondholders - a move that would have an impact on existing shareholders.
Celestial had a dream run when it listed in 2004. The stock soared, hitting a high of $1.95 in May 2006, before its fall from grace. After yesterday’s announcement, it slumped 1.5 cents, or 7.5 per cent, to close at 18.5 cents with 24.3 million traded. It is down 50 per cent since the start of the year.
The warnings signs came as early as March when auditors PricewaterhouseCoopers (PwC) said there was a possibility bondholders would seek an early redemption of the convertible bonds.
PwC had warned that Celestial had to raise money in case the bonds - issued in June 2006 - were redeemed this year. The bonds mature on June 12, 2011.
‘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,’ said PwC.
Celestial issued the zero-coupon convertible bonds in 2006 at a conversion price of $2.57 per share - over 30 per cent premium to its share price then. It wanted cash to finance R&D and to invest in bio-diesel production.
Around March this year, former director Cheung Wai Kwok started paring his stake in the company: He sold about 6.2 million shares in three separate deals, cutting his stake to about 4.97 per cent.
Executive chairman and chief executive Ming Dequan holds 28.37 per cent, according to data compiled by Bloomberg.
The firm was once a favourite of investment guru and Templeton Asset Management’s managing director Mark Mobius.
In late 2005, his investment group acquired a 5 per cent stake through a share placement but sold a portion six months later to free up cash for other ventures.
Mr. Mobius told The Straits Times last night that he has no immediate intention to let go of the firm’s stake in Celestial.
‘Eventually, we hope to sell it off for a profit but we are not short-term investors,’ he said.
Celestial reported last month that revenue had slumped 22.5 per cent for the first quarter ended March 31 to 469.6 million yuan (S$99.5 million), down from 605.7 million yuan a year ago as consumers cut back on spending. Net profit was up 8.4 per cent, from 130.2 million yuan to 141.1 million yuan.
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Celestial NutriFoods in a bind
It announces that it is unable to pay $274m to bondholders by today
Yang Huiwen
12 June 2009
Yet another S-chip company is on the rack: Celestial NutriFoods faces a near- impossible demand to pay $274 million to bondholders by today’s deadline.
Celestial’s crisis comes in the wake of a series of financial woes, accounting irregularities and scandals at S-chips -China-based firms listed on the Singapore Exchange - and raises concerns about the sector’s standard of governance.
China EnerSave, Sino-Environment Technology Group and Ocean International are among firms that have been flagged by auditors.
Investors have sold down S-chips over recent months and yesterday’s news about a once-feted company will only further weaken sentiment.
In a statement to the SGX yesterday, Celestial admitted that it will ‘not be in a position to meet its payment obligations...to the bondholders’.
Merrill Lynch has been appointed to help review the firm’s operations and to restructure or repurchase the bonds. It will also help to negotiate with bondholders, who demanded on May 23 that the China-based producer of soyabean food and beverages repay the bonds.
Celestial has pressed on with fund- raising, which began early last year, but it warned that it was ‘not optimistic’ about obtaining new funding by the due date.
It said on May 25 that it could not pay up ‘based on the funds currently available to the company outside the PRC and after considering its working capital requirements in the PRC’.
It added that it may have to undertake more borrowing or issue new shares to pay the bondholders - a move that would have an impact on existing shareholders.
Celestial had a dream run when it listed in 2004. The stock soared, hitting a high of $1.95 in May 2006, before its fall from grace. After yesterday’s announcement, it slumped 1.5 cents, or 7.5 per cent, to close at 18.5 cents with 24.3 million traded. It is down 50 per cent since the start of the year.
The warnings signs came as early as March when auditors PricewaterhouseCoopers (PwC) said there was a possibility bondholders would seek an early redemption of the convertible bonds.
PwC had warned that Celestial had to raise money in case the bonds - issued in June 2006 - were redeemed this year. The bonds mature on June 12, 2011.
‘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,’ said PwC.
Celestial issued the zero-coupon convertible bonds in 2006 at a conversion price of $2.57 per share - over 30 per cent premium to its share price then. It wanted cash to finance R&D and to invest in bio-diesel production.
Around March this year, former director Cheung Wai Kwok started paring his stake in the company: He sold about 6.2 million shares in three separate deals, cutting his stake to about 4.97 per cent.
Executive chairman and chief executive Ming Dequan holds 28.37 per cent, according to data compiled by Bloomberg.
The firm was once a favourite of investment guru and Templeton Asset Management’s managing director Mark Mobius.
In late 2005, his investment group acquired a 5 per cent stake through a share placement but sold a portion six months later to free up cash for other ventures.
Mr. Mobius told The Straits Times last night that he has no immediate intention to let go of the firm’s stake in Celestial.
‘Eventually, we hope to sell it off for a profit but we are not short-term investors,’ he said.
Celestial reported last month that revenue had slumped 22.5 per cent for the first quarter ended March 31 to 469.6 million yuan (S$99.5 million), down from 605.7 million yuan a year ago as consumers cut back on spending. Net profit was up 8.4 per cent, from 130.2 million yuan to 141.1 million yuan.
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