Pressure eases on debt-ridden Delong

An alternative settlement scheme for RMB 1.5 billion convertible bonds will ease cash flow pressures on Delong Group.

The Singapore Exchange Mainboard-listed manufacturer of hot-rolled steel coils recently announced the successful restructuring of RMB 1.5 billion in convertible bonds.

The Group had embarked on discussions with holders of its convertible bonds earlier this year. The successful restructuring of the Old Convertible Bonds provides Delong with a financially viable scheme to fulfill its debt obligations, while reducing the Group’s gearing.

On 26 November 2009, Delong made its initial cash settlement of US$30 million (or RMB 205 million) to bondholders, redeeming approximately US$80 million (or RMB 546.1 million) in principal at a 62.5 per cent discount. The next two scheduled redemptions will be due 31 December 2010 and 31 December 2011, at a discount of 20.0 per cent and 15.0 per cent to the principal amount redeemed respectively.

On the same day, the Group also undertook a mandatory conversion of approximately US$30 million (or RMB 205 million) of the outstanding debt into approximately 45.2 million converted ordinary shares of Delong at a conversion price of S$0.9211 (being the weighted average share price between 17 August 2009 to 11 November 2009). To be held by the bondholders, this class of shares will not be listed on the Singapore Exchange Securities Trading Limited.

Commenting on the CB Restructuring, Chairman Mr Ding Liguo said, “We are extremely grateful for the support that our bondholders and shareholders have shown the Group throughout the process. This is the outcome that we need to achieve, in order to ensure the continued viability of the Group’s operations.”

“Although the operating environment is likely to remain challenging in the near-term, we have emerged from the worst. Looking forward, we remain focused on cost containment and efficiency enhancement. In time, we will also be exploring new possible routes of growth to bring the Group further and stronger,” added Mr Ding.

Uncertainty surrounding the recovery of the global economy had prompted the Company to reassess its ability to fulfill its obligations under the Old Convertible Bonds, in particular its obligation to redeem in part or full the Convertible Bonds at a redemption price at 109.34% of the principal amount on 8 June 2010 at the election of the bondholders.

In 3Q2009, Delong recorded an over ten-fold surge in the Group’s gross profit to RMB 248.2 million in 3Q2009 from RMB 21.7 million in 3Q2008. Net profit after tax was RMB 139.1 million in 3Q2009, compared with a net loss after tax of RMB 63.2 million in 3Q2008.