The first default convertible bond is about to be born? Can the old dragon head put out the fire?

category:Finance
 The first default convertible bond is about to be born? Can the old dragon head put out the fire?


On the brink of default

*St Huifeng convertible bonds issued a notice on the evening of 5th, saying that the closing price of the companys shares was lower than 70% of the current conversion price in 30 consecutive trading days from April 21 to June 5, 2020, and the conditional resale clause of convertible bonds took effect.

Its not terrible to sell back, its terrible to have no money to take over.

How much money is missing?

According to the latest data, as of May 21, the proportion of outstanding shares of Huifeng convertible bonds was 99.91%, and the number of outstanding shares was about 8.44 million. If all the holders sell back the Huifeng convertible bonds in their hands, the total resale amount will be about 870 million yuan.

Source: Shenzhen Stock Exchange

How much money does the company have? *St Huifengs consolidated balance sheet in the first quarter of 2020 shows that as of March 31, there are still RMB 322 monetary capital, RMB 311 million receivables, RMB 13 million receivables financing, RMB 48 million other receivables, RMB 759 million inventory and other current assets totaling RMB 1.857 billion.

If the resale really defaults, Huifeng convertible bond will not only become the first convertible bond suspended from listing, but also the first default convertible bond.

Application for 1.1 billion credit from down revision to share price

*St Huifeng is also trying to avoid default. Along with the announcement of resale, there are also news about the transfer of stock price and the application for 1.1 billion yuan credit.

Data source: wind

In addition to the next big move, * ST Huifengs board of directors also plans to apply to the bank for a comprehensive credit financing business of no more than 1.1 billion yuan, and proposes to provide guarantee for the financing of subsidiaries.

A good chance to cash in?

Since the middle of November 2017, the price of Huifeng convertible bonds has been below 103 yuan most of the time, and the lowest price fell to 71 yuan in the middle of October 2018. If at that time, the return rate of holding and resale success is 45%, and the annual return rate is more than 20%.

Data source: wind

As of the end of the first quarter of this year, the largest holder of Huifeng convertible bonds is Tao Jingwei, accounting for 18.35%; the second largest holder is Shanghai Haiguo Investment Co., Ltd., accounting for 6.78%. According to the public information, the name of the natural person shareholder of Shanghai Haiguo Investment Co., Ltd. is also Tao Jingwei.

From the fourth quarter of 2018 to the end of 2019, Tao Jingwei held 6.11%, 12.27%, 18.91%, 18.83% and 16.58% of Huifeng convertible bonds at the end of each quarter. If the big money owner sells back all the convertible bonds, it will put a lot of pressure on the issuer.

Continuous blast

Huifeng convertible bond was issued on April 21, 2016. At that time, the growth rate of net profit of * ST Huifeng had declined. According to its 2016 semi annual report, in the first half of 2016, the market demand and the increase of pesticide export continued to decline, and the overall gross profit rate of the industry declined significantly year on year. The companys current net profit attributable to the parent is 104 million yuan, down 6.85% year on year.

However, in only one year, * ST Huifeng turned from prosperity to decline. In 2018, the company received the penalty of production suspension and rectification due to environmental protection failure, which also became the watershed for the development of * ST Huifeng.

At the beginning of that year, Lianyungang Huatong chemical, a holding subsidiary of * ST Huifeng, was shut down because of the illegal discharge of waste water. Xi Shenghu, chairman of Huatong chemical, and Zhou Haiwei, a senior executive, were also taken away to assist in the investigation. Prior to this, a number of subsidiaries of St Huifeng were involved in environmental protection violations, and they were issued with administrative penalty decisions. However, St Huifeng did not disclose the above information completely and accurately.

Not only that, but also the problem of increasing revenue. In January 2018, * ST Huifeng acknowledged in response to the inquiry letter from Shenzhen stock exchange that some of cofetts revenues in 2012 were inflated. In April, * ST Huifeng was put on file by the CSRC for suspected illegal information disclosure. In the same year, the company suffered the first loss and the net profit attributable to the parent company was RMB 547 million. More than a year later, the CSRCs findings came out. In December 2019, * sthui Fengshou received the notice of administrative penalty issued by Jiangsu regulatory bureau of CSRC. According to the investigation, * ST Huifeng involved three information disclosure violations, including false increase of revenue, concealment of environmental protection punishment, and inaccurate disclosure of senior executives by criminal detention. In 2019, * ST Huifeng had a loss of more than 500 million yuan, which has been a loss for two consecutive years. Since the opening of the stock market on April 29, 2020, delisting risk warning has been implemented for the companys stock, and the stock abbreviation has been changed from Huifeng stock to * ST Huifeng. In the first quarter of 2020, * ST Huifeng continued to lose 75.5495 million yuan. Source: Yang Qian, editor in charge of China Securities News_ NF4425

Not only that, but also the problem of increasing revenue. In January 2018, * ST Huifeng acknowledged in response to the inquiry letter from Shenzhen stock exchange that some of cofetts revenues in 2012 were inflated. In April, * ST Huifeng was put on file by the CSRC for suspected illegal information disclosure. In the same year, the company suffered the first loss and the net profit attributable to the parent company was RMB 547 million.

More than a year later, the CSRCs findings came out. In December 2019, * sthui Fengshou received the notice of administrative penalty issued by Jiangsu regulatory bureau of CSRC. According to the investigation, * ST Huifeng involved three information disclosure violations, including false increase of revenue, concealment of environmental protection punishment, and inaccurate disclosure of senior executives by criminal detention.

In 2019, * ST Huifeng had a loss of more than 500 million yuan, which has been a loss for two consecutive years. Since the opening of the stock market on April 29, 2020, delisting risk warning has been implemented for the companys stock, and the stock abbreviation has been changed from Huifeng stock to * ST Huifeng. In the first quarter of 2020, * ST Huifeng continued to lose 75.5495 million yuan.