* Loans: Lenders prepare for default after missed credit card repayment

HONG KONG, Feb 15 1 billion HK dollars (US $ 128 million) convertible bond matured last month.

The non-payment of the private CB is expected to trigger a cross-default on the 6.5% US $ 200 million senior Huiyuan Juice bonds maturing in 2020 as well as a three-year facility of € 180 million ( 204 million US dollars) signed in March 2017. The first tranche of the 60 M € loan is expected at the end of March.

Lenders are bracing for the worst after the company announced on February 1 that it planned to hire legal and financial advisors as it explored ways to fund its repayment obligations. Five members of the board of directors, including representatives of investor CB and main shareholder SAIF Partners, and the CEO of the company resigned this year.

“We expect our credit committee to be stricter than usual in approving future applications from other Chinese entry points if Huiyuan Juice misses the first payment,” said a banker in Hong Kong.

The mood among lenders is grim after a string of defaults and corporate governance issues related to Chinese entry points in recent months.

Orange juice maker Summi (Group) Holdings, another POE, is in talks with banks after missing the Nov. 5 deadline for the mandatory prepayment of a three-year, $ 80 million loan signed in August 2016. The company’s net profit for the year ended On June 30, 2018, it plunged 83% to 11.56 million Rmb (1.71 million US dollars) compared to the previous year .

Last month, Shenzhen-listed composite materials group Kangde Xin, a private manufacturer of high-polymer materials, defaulted on short-term bonds totaling Rmb 1.5 billion. The company’s first three-year, $ 200 million loan launched last May was canceled late last year following a suspension from trading in Kangde’s shares from early June.

“Some Taiwanese, Korean and other small banks will prefer state-owned enterprises [rather than POEs] but part of it is because they have a little book. The big banks will continue to be selective and only look at the big Chinese entry points which are leaders in their sectors and which have good financial and growth prospects, ”another banker from a Chinese lender told Hong Kong.

FEELING ACTED

This approach has not always guaranteed security. China Huishan Dairy Holdings, once the country’s largest integrated dairy farm, and China Hongqiao Group, the world’s largest aluminum producer, have both given lenders a hard blow.

Provisional liquidators have been appointed for Huishan Dairy, which has not repaid its loans. The Hongqiao Group was targeted by short sellers in early 2017 and was slow to release financial statements and news of auditor changes. She then introduced state-owned Citic Group as a strategic investor in November of the same year and successfully raised US $ 450 million from a 363-day offshore bond last April.

Meanwhile, there doesn’t seem to be any respite for Huiyuan Juice lenders. Eleven months after the disclosure of previously undeclared business-to-business loans, Huiyuan Juice’s difficulties continue. Last July, it requested another waiver requesting an extension until the end of November to publish its 2017 full-year results and resume trading of its shares, after failing to meet an earlier deadline of June 29. The stock is still suspended and the 2017 results are still not published.

Bank of China (Hong Kong) was the lead arranger and commissioned bookrunner of the € 180 million term loan, which attracted the BoC Macau branch, China Minsheng Banking Corp, Chiyu Banking Corp and Nanyang Commercial Bank .

People familiar with the situation said the borrower made small repayments totaling less than € 10m, although lenders attempted to negotiate a full repayment by the end of December 2018, which was earlier. provided that.

When obtaining the first waiver, Huiyuan Juice had declared in a stock exchange filing that “the early repayment of the syndicated bank loan will not have a material adverse impact on the financial position or the operating results of the group” .

Huiyuan Juice has neither fulfilled all the conditions of the waivers nor those required by the Hong Kong Stock Exchange for the resumption of trading in its shares. These include the conduct of a forensic investigation into intercompany loans and an independent review of internal control, and the publication of all outstanding financial results.