Shunfeng Photovoltaic has opted for a convertible bonds issue to fund its CNY3 billion (US$387 million) acquisition of Wuxi Suntech.
In an announcement to the Hong Kong Stock Exchange after trading hours on Friday night, Shunfeng revealed that its principal shareholder "Mr. Cheng," believed to be Cheng Kin-ming, will pay the balance owing on the deal some CNY2.5 billion out of his own pocket in return for convertible bonds, which would give him a more than two-thirds controlling interest in the company if converted.
Cheng, via the Peace Link Services Ltd subsidiary of his Faithsmart Ltd company, currently controls 23.6% of Shunfeng but, should he fully convert the bonds which the board intends to issue, as well as the bonds purchased by Peace Link in earlier issues on December 31, 2012, and June 28, his shareholding in the enlarged company would rocket to 68.74%.
Public shareholding would dwindle to 15%
In that scenario, the second largest individual shareholder, Endless Rocket International Ltd, would see its holding fall from 13.99% to just 4.52% and the shares held by other, smaller, public investors would fall from 47.96% to just 15.49%.
Under the terms of the proposed HK$3.58 billion (US$462 million) convertible bonds issue, HK$2.148 billion worth of bonds would be issued to Peace Link with five other individual investors taking up the remainder of the bonds.
Shunfeng's decision to mortgage control of the company to real estate investor Cheng has been prompted by the demand of the Wuxi Suntech administrator to have the outstanding CNY2.5 billion owed from the acuqisition handed over within a month of completion of the deal, in order to part-pay creditors of the former solar giant.
Shunfeng's board is aiming to persuade its shareholders to vote through the bonds issue by January 21 and will issue a circular with further details on the fundraising on or before Monday December 16.
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