China Essence: plan to refinance its US$50m (~RMB340m) DBS Bank loan has been delayed and complicated by "ongoing unfavorable macroeconomic conditions and tightened bank internal controls". Its bankers HSBC and DBS expect the ongoing loan syndication to refinance the loan to be completed by end Oct. DBS will further extend the loan until details for the syndicated loan are finalized...
If the syndicate loan is not successful, Company has 2 contingency plans, i) propose a new 3 yr term loan arrangement with HSBC and DBS, or ii) make partial loan payment to DBS (but only at end 2010) and roll over the rest for a period of 1-3 yrs…
Besides the DBS loan, Company has additional RMB 200 bank loans due Jul 2011, and RMB 330m worth of (out-of-money) convertible bonds to redeem by Dec 2011. This compares with cash holdings of RMB 500m, and FYMar10 EBITDA of ~RMB 250m. Gearing appears reasonable (net debt/equity of 16% as at Jun ’10), while interest coverage (EBITDA/ interest) is 10x. Financial ratios do not suggest that China Essence is in particular distress currently. Stock trades at 3.8x PE.
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