Stocks News
- Shenzhen bank issues new share reform plan
Date: 17-May-2007 Sources: (Shenzhen Daily)
SHENZHEN Development Bank Co., controlled by U.S. buyout firm TPG, sweetened an offer to investors to make all its stock tradable and remove a funding hurdle to expansion in the world's fastest-growing major economy.
Shenzhen Development will give minority shareholders one for every 10 yuan-denominated shares they hold to compensate for the dilution of stakes, the Shenzhen-based company said in a statement yesterday. The bank will join a compulsory program to make more than US$200 billion of mostly State-owned equity tradable if investors who rejected an offer in July accept the new plan.
'Investors will be more comfortable with the new proposal and the chance of its getting approved is quite high, as people understand the dire situation with its capital shortage,'' said Wu Xuan, a Shenzhen-based bank analyst at Penghua Fund Management Co., which owns shares in Shenzhen Development.
Shenzhen Development needs funds to overcome regulations on capital adequacy that prevent it from opening more branches and offering new loans in a nation where bank loans grew an average 14.5 percent between 2000 and 2005. The bank's shares gained 92 percent this year, the best performance among the nation's 10 listed banks, as it improved asset quality and earnings.
In addition to the offer of shares, Shenzhen Development plans to grant investors free call warrants that will give them the option to buy more shares.
TPG, which controls Shenzhen Development through its unit Newbridge Capital LLC, will have its ownership cut to 16.68 percent from the previous 17.89 percent as the company offers 1.409 billion free shares to minority investors. TPG is the largest holder of non-tradable shares in the Shenzhen-listed bank.
Shenzhen Development has to shore up its capital adequacy ratio, a key measure of financial strength, to the 8 percent minimum required by the banking regulator. Its ratio stood at 3.8 percent as of March 31.
The bank and 39 other publicly traded companies that failed to complete share reforms had the limit on daily price movements cut by half to 5 percent starting Jan. 8. They are also barred from selling new shares, hampering their ability to raise funds.
At least 90 percent of China's more than 1,300 publicly traded companies have completed a mandatory program to make more than US$200 billion of mostly State-owned equity tradable. Holders of non-tradable stock must compensate those with tradable stock by giving them cash or shares.
In July, minority stockholders rejected Shenzhen Development's revised plan to make tradable 536 million shares, or 27.5 percent of the outstanding equity. Owners of tradable stock were offered 0.48 yuan in cash for every 10 shares they own, payable if the stock traded outside a given range over a 60-day period.
In the new plan, the condition was removed and the bank agreed to give stockholders 0.5 six-month and 0.5 nine-month warrants for every 10 shares they hold, the bank said yesterday. The exercise price is set at 19.89 yuan (US$2.58), a 29 percent discount on its closing price May 11, the last trading day.
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