At present, Tianqi lithium and the syndicate have reached an agreement that the extension date of the loan syndicate shall be December 28, and the revised and restated loan agreement confirmed and signed by the syndicate agent bank shall take effect, and the time between the two is shorter.
At present, two different fates lie in front of Tianqi lithium: one is that when the ten billion debt is passed, Tianqi lithium will enjoy the dividend of the growth of new energy vehicles in the next few years as the worlds three largest lithium companies; the other is that if this hurdle cannot be overcome, it will go into default and bankruptcy reorganization.
As for whether the company will resolve the crisis by selling assets or introducing war investment in the future, there is great uncertainty in the game and negotiation involving multiple interests.
Multi interest game
On December 1, the constituent stocks of Shenzhen Stock Exchange 100 index were adjusted, Ganfeng lithium industry (002460. SZ) was transferred in, and Tianqi lithium industry (002466. SZ) was transferred out. The former two companies are now in debt, and the latter is known as a debt breakthrough.
In 2017, Tianqi lithium industry was the most brilliant in the last round of lithium industry boom. At that time, Jiang Weipings family ranked among the top 100 rich in Hurun with a wealth of 27.5 billion yuan, ranking the third in Sichuan Province.
To some extent, Jiang Weiping has feelings. In 2018, when sqm was acquired, he was 63 years old and had a fortune of 19 billion yuan, but he was still willing to gamble on all his wealth. Was it just for money?
In the end, Jiang Weiping achieved his wish, and Tianqi lithium realized one participation and one control over the worlds lithium mines and became an undisputed world lithium industry giant.
However, it is expensive to be a global lithium giant.
In order to acquire sqm, Tianqi borrowed $2.5 billion of M & A loans through the syndicate in 2018, of which $1.884 billion was due on November 29, 2020.
For the huge M & A loans, the company originally prepared a set of financing plans to support.
However, the plan did not change quickly, and some subsequent financing plans failed to be implemented. For example, the Hong Kong stock market was listed because the market price was too low before and the listing approval issued by the CSRC expired. Combined with the impact of lithium price decline, the companys capital has not improved significantly in recent two years.
Until the final maturity date at the end of November this year, there is still no clear solution, and the US $1.8 billion debt can only be extended.
It is hard to say whether this result is good or bad. The success of the extension just won an extremely short respite.
According to the progress announcement issued on the evening of November 30, the syndicate agreed to extend the loan from the maturity date to the earlier of (1) December 28, 2020; and (2) the amended and restated loan agreement confirmed by the syndicate agent has come into effect.
Knowing that the debt due is huge, why delay it again and again? This may be related to the multi-party game among listed companies, syndicates and investors.
The 21st century economic reporter learned from relevant channels that Tianqi lithium intends to introduce war capital to ease the pressure on funds, such as state-owned enterprises with strong capital strength, but failed to reach an agreement on some core interests, such as the proportion of shares to be transferred.
The other way is to sell assets to repay debts. Tianqi lithium holds the shares of sqm and talison, the two major lithium giants. There have been rumors of selling in the market. However, as a core asset that has paid a high price, it is unlikely to sell. Moreover, the dawn of lithium industry has gradually emerged.
Hope of Tianqis regeneration
This debt rollover is reasonable.
On the evening of November 13, Tianqi lithium industrys suggestion of the risk of failing to repay the principal and interest of a large amount of due debts once triggered heated discussions among all parties in the market.
But for investors who have long been concerned about the company, who doesnt know that the company will repay such a large amount of debt? At that time, the uncertainty only existed in the level of whether the company could succeed in the extension.
In this regard, individual investors from the front line of banks have successfully predicted that Tianqi lithiums debt will be extended.
The judgment is based on two aspects: firstly, the substantial overdue debt composition will lead to the disposal of the companys equity and assets, and the banks providing loans will face the pressure of large amount of write off, and all parties will lose. Secondly, Tianqi lithium has the willingness to repay, just because the cash is really tight and unable to repay.
Even if one day the company goes to the stage of bankruptcy reorganization, Tianqi lithium industry, relying on the resource advantage in hand, does not seem to worry about the capital side to take over the offer.
First, talison, which was acquired by the company in 2013, owns the Greenberg mine in Western Australia. In 2018, the ore grade of the mine was the highest and the production cost of chemical grade lithium concentrate was the lowest in the world. From 2012 to 2018, talison was the worlds largest supplier of technical grade lithium concentrate.
Under the background of the sharp decline of lithium price in 2019, the gross profit rate of lithium concentrate products of Tianqi lithium industry did not fall below 68%, and even more than 70% in 2017 and 2018.
According to roskill2019 report, Tianqi lithium has become the third largest battery grade lithium carbonate supplier in the world according to the sales volume of the following tourists in 2018.
It should be pointed out that the grade of lithium ore resources determines the quality of lithium carbonate and other products. After the intensive M & A in the last business cycle, the upstream high-quality lithium resources have been completely divided.
In terms of the operation of lithium industry, with the decline of lithium price, the upstream capacity supply has been gradually cleared up in recent two years. The domestic lithium material price rebounded significantly in the second half of the year, and the industry bottoming expectation is increasing.
Altura, one of Australias top five lithium producers, has entered bankruptcy proceedings in October this year, following the closure of several Australian lithium producers in 2019.
According to data from Baichuan Yingfu, on August 12, the mainstream price range of domestic battery grade lithium carbonate market was between 38000 yuan and 41000 yuan, and the average price level was 39500 yuan / ton. By November 30, the mainstream price range in the market rose to between 44000 and 45500 yuan, and the average price rose to 44800 yuan / ton.
The quotation of 45500 yuan, even 48000 yuan, is also available. At present, businesses generally feedback that the market is short of goods, and the actual transaction price needs to be discussed in detail. Business Club lithium carbonate industry analyst Qu Lin on December 1 said.
The reason lies in the contraction of supply and the concentrated release of domestic demand. In the first half of the year, the whole industry was obviously suppressed by the epidemic situation, while in the second half of the year, with the large volume of new energy vehicles, the demand driven obviously.
More importantly, the future development trend of new energy vehicles is clear. In addition to Tesla, Weilai, Xiaopeng and other new energy vehicle enterprises, a number of traditional automobile manufacturers including Volkswagen have also announced new energy development plans.
The darkness before dawn.
It may be that the company is optimistic about the solution of Tianqi lithiums debt problem. In the near future, the company can still maintain a total market value of nearly 40 billion yuan.
In terms of specific companies, Tianqi lithium industry became the biggest winner, with a cumulative increase of 40.56% in November, while Ganfeng lithium and Zhongkuang resources (002738. SZ) increased by 28.58% and 19.18% in the same period.
At the critical stage of Tianqi lithiums debt maturity, foreign institutions are buying against the market.
On November 25, the number of shares held by northbound capital reached 63.3973 million shares, accounting for 6.72% of the companys free circulation share capital, a record high since the opening of the mainland stock connect.
Is northward capital a big gamble?
Not really. Compared with ordinary investors, overseas investment institutions have certain information advantages.
The reporter of 21st century economic report noted that in an investor forum, some investors have transmitted the news from overseas media that the bank has agreed in principle to extend the term, and the key regulation and control is still under negotiation.
However, this can not avoid the potential risk points and uncertainties.
First of all, if we choose the way of war investment to resolve the crisis, Tianqi lithiums current debt scale is too large to be borne by ordinary enterprises, and the war investor needs to have very strong capital strength.
Assuming that the war investor enters and invests 10 billion yuan, it is bound to demand more interests, such as controlling equity? How many shares will Jiang Weiping transfer? How to balance the two?
Secondly, although Tianqi lithium has no problem with its own operation status, if the debt problem is not solved, high financial expenses will exist one day, which will continue to swallow up the companys operating profits.
Take the first three quarters of this year as an example, Tianqi lithiums financial expenses were 1.286 billion yuan, and there was a loss of 1.103 billion yuan in the current period. This is the second consecutive year of loss for the company, and it will face the risk of suspension of listing in 2021. Thirdly, although the prosperity of lithium industry in the second half of the year has improved significantly, the upstream capacity is still clearing up. However, if the lithium price continues to rebound in the future, will the upstream supply side increase again? Today, there are still many uncertainties in Tianqi lithiums debt resolution, which is likely to be a repeated and tortuous process. Although the position of northbound capital, which once held a record high, has been reduced for three consecutive trading days. Until the company fails to provide a clear solution to the debt, everything is unknown. Source: Yang Bin, editor in charge of economic report in the 21st century_ NF4368
Take the first three quarters of this year as an example, Tianqi lithiums financial expenses were 1.286 billion yuan, and there was a loss of 1.103 billion yuan in the current period. This is the second consecutive year of loss for the company, and it will face the risk of suspension of listing in 2021.
Thirdly, although the prosperity of lithium industry in the second half of the year has improved significantly, the upstream capacity is still clearing up. However, if the lithium price continues to rebound in the future, will the upstream supply side increase again?
Today, there are still many uncertainties in Tianqi lithiums debt resolution, which is likely to be a repeated and tortuous process.
Although the position of northbound capital, which once held a record high, has been reduced for three consecutive trading days.
Until the company fails to provide a clear solution to the debt, everything is unknown.