With no details emerging yet of the results of yesterday’s planned winding-up petition hearing, Singyes Solar shareholders have been given another red ink date for their diaries.
The embattled solar engineering, procurement and construction (EPC) services provider will hold a special general meeting in Hong Kong on October 31 to vote on a proposed HK$1.55 billion (US$198 million) bail-out by Chinese state-owned entity Water Development (HK) Holding Co Ltd.
The stakes could not be higher with the takeover one of two crucial elements of a plan to turn around a company with more than RMB3 billion (US$424 million) in outstanding borrowings, many of which are in default. As financial adviser Optima Capital noted three times yesterday in a letter to Singyes shareholders recommending full support of the proposed takeover: “The subscription is the only available option to resolve the defaults.”
And like any good spendthrift, Singyes has already decided exactly how it will spend its windfall from Water Development, an entity which engages in “renewable energy business” in China as well as, according to yesterday’s update to the Hong Kong exchange, the operation of water projects, environment management, modern agriculture and cultural tourism.
The biggest chunk of the takeover cash, some 35.5% or HK$550 million, would be devoted to the second plank of the Singyes rescue plan, a debt restructuring exercise related to the near US$430 million of defaulted senior notes and convertible bonds held by the company’s creditors. From that HK$550 million sum, US$41.4 million would go to paying creditors an immediate portion of what they are owed, on a pro rata basis, and US$8.6 million would be paid as a pro rata “consent fee” to creditors who signed up to the deal by August 19 this year.
The terms of the proposed debt restructuring would then involve fresh senior notes being issued to creditors, to the value of their original investments minus any disbursements made under the two incentive payments just noted. Singyes yesterday stated it had persuaded the holders of 94.5% of the problematic debt to sign up to the scheme.
Make or break
Professional fees associated with the debt restructuring plan would eat up around HK$85 million – 5.5% – of the takeover cash injection and a further 32.3% slice (HK$500 million) would be allocated to financing frozen solar EPC activity, curtain wall manufacturing and Singyes’ green building business. Singyes, which also manufactures building-integrated PV products, said it would put aside HK$300 million for “new business opportunities” in “new energy”, including possible merger and acquisition targets.
The remaining HK$115 million, amounting to around 7.3% of the Water Development windfall, would be devoted to “general working capital”.
Given the make or break nature of the takeover vote, rejection of the proposal would constitute a major shock even though Water Development would own 66.92% of an enlarged company in which independent shareholdings would be significantly diluted.
All such speculation, however, may prove academic depending on the result of the winding-up petition due to be presented to the High Court of Hong Kong yesterday by Deutsche Bank Hong Kong over a disputed US$6.27 million debt.