Behind The Forced Retreat Of The Hui Shan Dairy Industry: The New Asset Reorganization Plan Quietly Came Out. Bank Creditors Expect An Early Repayment.

After two years of debt crisis, the Hong Kong stock listed company 06863.HK is finally doomed to be forced to withdraw from the market.

On the evening of December 18th, the HKEx announced that the listing status of the Hui Shan dairy industry will be abolished on the basis of the cancellation procedure from 9 a.m. on December 23, 2019.

Hui Shan dairy said that all shareholders and investors of the company should be aware that since December 20, 2019, the shares will no longer be listed and no longer traded on the stock exchange, even though the shares remain valid. Subsequently, Hui Shan dairy industry will no longer be governed by listing rules.

"In fact, the Hui Shan dairy industry was forced to withdraw from the market, which is also within our expectation." A Hui bank creditor bank told reporters. Due to the fact that the Hui Shan dairy asset restructuring plan has not been approved by most creditors, the Hui Shan dairy industry is unable to submit a resumption proposal for the HKEx to meet the requirements of sufficient business operations and assets. According to the Hongkong rules of the HKEx, it has to face a mandatory delisting.

He said bluntly that fortunately, the Hui Shan dairy industry was forced to withdraw from the market, which would not affect the progress of the current asset reorganization.

The reporter learned exclusively that after the intervention of Yili Industrial Group, the new asset restructuring plan, led by Erie, Hui Shan dairy management team and asset reorganization manager, has been sent to some large creditor financial institutions for comments.

"If the new asset reorganization plan is still rejected at the creditors voting conference, then the Hui Shan dairy industry will face bankruptcy liquidation, or the court ruled that the asset reorganization plan will be passed." A person familiar with the progress of the assets reorganization of the Hui Shan dairy company revealed to reporters. As the Erie side hopes that all creditors can substantially reduce the amount of debt (including debt writedowns, cut the amount of cash to pay, and increase the proportion of debt to equity swap), it is still unknown whether all kinds of creditors agree to the new asset reorganization plan.

From 9 a.m. on December 23, 2019, the listing status of Hui Shan dairy will be abolished according to the procedure of cancellation. - Gan Jun photo

Delisting of Hong Kong stocks will not affect asset restructuring

For the compulsory delisting of 06863.HK, the HKEx announced that in March 27th last year, the Hong Kong Stock Exchange listing department held that the Hui Shan dairy industry did not comply with the provisions of "sufficient business operations or assets". It entered the first stage of the licensing procedure according to the listing rules, and placed the Hui Shan dairy industry in the second and three stages of the licensing procedures in September 27, 2018 and May 3, 2019 respectively. Prior to the expiry of the third phase of the licensing procedure, the company did not submit any proposals for resumption of trading, so the Stock Exchange decided to cancel the listing position of the Hui Shan dairy industry in November 15, 2019.

"In fact, the Hong Kong stock listed company of Hong Shan is forced to withdraw from the market, which is not necessarily a bad thing for the reorganization of assets." A lawyer familiar with Hongkong's capital market rules told reporters. Because of the debt crisis of more than ten billion, the main reason is the large shareholders. Therefore, many shareholders of Hong Kong stock listed company of Hui Shan dairy company will not allow large shareholders to transfer the assets of the company through the asset reorganization plan. Therefore, the whole asset reorganization plan will be adopted even if it is approved within the territory. It will not be difficult to get through the shareholders' meeting of the Hong Kong stock listed companies. The foreign exchange exchange will not be "watching" the assets of the 83 companies of the Hong Kong listed companies of the Hui Shan dairy company have been removed, leaving the corresponding "debts" borne by the Hong Kong listed companies shareholders.

"With the forced exit of the Hui Shan dairy industry, the progress of its asset restructuring program will not be affected by the Listing Rules of Hongkong, and it will also alleviate the pressure from shareholders of Hong Kong stock listed companies." He analyzed. But this means that shareholders of Listed Companies in Hong Kong dairy company have to bear higher investment losses. By the end of March last year, the price of Hui Shan dairy was only HK $0.42 / share, compared with the average stock price of HK $2.8 / share in 2017, which fell by about 85%.

The lawyer told reporters that it is unclear whether the shareholders of the listed companies of the Hong Kong dairy company will sue for the corresponding loss of stock investment from the original management team of the Hui Shan dairy group and the actual controller.

In the view of the above creditor banks, whether the above shareholders will initiate a lawsuit will not affect the progress of the assets reorganization of the Hui Shan dairy industry. After all, the domestic assets of the Hui Shan dairy industry are in the process of bankruptcy reorganization, which is not related to the mandatory delisting of Hong Kong stock listed companies.

"At present, we pay more attention to whether the new asset reorganization plan after the intervention of Erie can be successfully voted through, because this can avoid the Hui Shan dairy industry in bankruptcy and liquidation phase, on the other hand, it will enable us to get cash payment as early as possible to recover certain credit losses." He told reporters.

The reporter learned exclusively that the new asset restructuring plan, which was developed by the three sides of Yili, Hui Shan dairy management and Hui Shan dairy asset restructuring manager, has been sent to some large financial institutions creditors for advice.

"However, the new asset restructuring plan has not mentioned that it will push the Hui Shan dairy industry to re visit Hongkong's capital market." A bank official who contacted the new asset reorganization plan told reporters that it would vote for the new debt with a higher proportion of the debt raised by all creditors.

All sides "game" new asset reorganization plan

Reporters have learned that the new asset restructuring plan has extended some of the provisions of the investment plan of the Inner Mongolia Yili Industrial Group Limited by Share Ltd and Inner Mongolia Yoran animal husbandry Co., Ltd., which have been published before the launch of the series of enterprise restructuring of the Hui Shan dairy group. That is, Erie intends to invest 1 billion 500 million yuan to acquire 67% of the new company of Hui Shan dairy company and undertake all debts of the Hui Shan dairy industry. In addition, the yeran animal husbandry (1% of investment, general partner), Erie and other strategic partners (99% of the investment partners, limited partners) jointly invested in the establishment of a limited partnership and share the equity of the new company of the Hui Shan dairy company with the convertible creditors.

Compared with the first asset restructuring plan, the biggest change of the new asset reorganization plan is that all creditors are required to reduce the amount of debt in large proportion (including debt reduction, reducing the amount of cash payment, and increasing the ratio of debt to equity swap).

According to the previous asset reorganization plan, as of mid January of this year, the amount of credit confirmed by Hui Shan dairy industry (that is, Hui Shan dairy debt) amounted to 24 billion 218 million yuan, of which the total creditor debt of the operating general creditors (traders and upstream and downstream supply chain companies) was about 5 billion 805 million yuan, and the small sensitive general creditors (mainly individual investors who made the related creditor's rights of Hui Shan dairy industry through the information management plan or financial products) totaled about 719 million yuan, and the creditor's rights of the creditors of the banking institutions and other financial institutions amounted to about 13 billion yuan.

Journalists have learned that in the new asset restructuring plan, the Erie side, in addition to requiring creditor financial institutions to reduce the debt amount of about 60%-80%, has also made adjustments to the cash payment schemes of ordinary creditors and small sensitive general creditors. For example, the cash payment scheme of ordinary creditors of business class has been changed to pay 20% of the creditor's rights in stages in the next 6 years. It is not 100% of the cash in 7 years proposed by the first version of the asset reorganization scheme, and the cash payment scheme of small sensitive general creditors is converted into 40% years in the next 4 years. It also requires creditors of financial institutions to cut about 70% of the amount of debt by way of debt write down, reduction of cash limit and increase of debt to equity ratio.

Insiders estimate that according to the estimated debt amount of 24 billion 218 million yuan in the Hui Shan dairy industry, the reduction of 70% debt amount means that the Illi side is only responsible for 7 billion 265 million yuan debt, plus the investment of 1 billion 500 million yuan, that is, the 8 billion 765 million yuan invested by Erie in exchange for 67% equity of the new company of Hui Shan dairy company is indeed a cost-effective business. The reason is that at the beginning of last year, the stock market of Hui Shan dairy was valued at 14 billion 927 million yuan, and the corresponding amount of the 67% stake was 10 billion yuan, which was higher than the 8 billion 765 million yuan invested by Erie.

"Therefore, the banks have different attitudes towards the new asset reorganization plan. Some small and medium banks still hope that the Erie can raise the amount of cash payment and reduce the debt reduction rules to meet the requirements of their banks' bad debts recovery. The large banks have already written off the bad debts of the Hui Shan dairy industry, and hope that they can get some cash payment as early as possible to reduce the actual losses." Bankers who contacted the new asset restructuring plan revealed to reporters. With Erie as a potential strategic investor, the attitude of big bank creditors to vote on the new asset reorganization plan is becoming positive and optimistic. Because they believe that the introduction of strategic investors will help better revitalize the Hui Shan dairy assets to create a better operating cash flow, so that the debt to equity part of the higher valuation increase.

He bluntly said that most of the Hui Shan dairy creditors did not want to see whether the Hui Shan dairy industry was voted twice because of the asset reorganization plan, and finally fell into bankruptcy settlement stage.