Delong executes renminbi, Singapore dollar convertible restructuring

New York, Nov. 12 - Delong Holdings Ltd. said it received all the necessary approvals to restructure its RMB 1.532 billion of renminbi-denominated, dollar-settled zero-coupon convertible bonds due 2012 and S$175 million zero-coupon exchangeable bonds due 2012 and executed supplemental trust deeds and agreements.

The changes were made because the company believed it might not be able to meet its obligations on the convertibles, Delong said when it announced an offer to amend the bonds on Sept. 9.

Delong said the move was needed because conditions in the steel industry "still remain unclear," despite growing demand.

It now has approval of bondholders for the changes, received at a meeting held on Oct. 2. On Thursday, a special meeting of shareholders supported the restructuring.

As amended, for the reniminbi convertibles, Delong will redeem 546.4 million yuan of the bonds for a payment of 204.9 million yuan, a discount of 62.5% on Nov. 26, 14 days after the offer closing date of Nov. 12. A further 170.8 million yuan of the bonds will be redeemed for 136.9 million yuan on Dec. 31, 2010, a discount of 20%, and 160.7 million yuan of the bonds for 136.6 million yuan on Dec. 31, 2011, a discount of 15%. Remaining bonds will be redeemed at maturity on June 8, 2012 at par.

In addition, 204.9 million yuan of the bonds will be converted into stock 14 days after closing at a price based on the volume-weighted average of the company's shares for the period starting on Aug. 17 and ending on the trading day before closing. The price was calculated as S$0.9211 per share.

Holders will have the option to put back 50% of these mandatory converted shares on each of the fourth and fifth anniversaries of the date of conversion. Delong will have the option to call the shares at a 5% compounded rate from Jan .1, 2010 to Dec. 31, 2014.

Whenever an excess cash account reaches $1 million, the funds will be used to redeem the bonds on a pro rata basis at a discount of 20% up to Dec. 31, 2010, a discount of 15% up to Dec. 31, 2011 and at par after that.

The modified bonds will pay interest at 5%, compared to 0% at present.

The conversion price will be set equal to the volume-weighted average of the company's shares for the period starting on Aug. 17 and ending on the trading day before closing.

Bondholders will also have the option to exchange their convertibles for new renminbi-denominated, dollar-settled 5% convertible bonds due June 8, 2012. These new bonds will be the same as the modified existing bonds, but with no restriction on convertibility, repayable at par at maturity with no scheduled redemption, no mandatory conversion, no right of first refusal with respect to the purchase of shares by the company, some undertakings such as the appointment of a director and a cash sweep mechanism will not be included, and the bonds will not be listed. The exchange ratio was set at 3.2091 new bonds for every existing bond at closing.

In total RMB 167,232,859 new bonds were issued.

Singapore dollar bonds

In addition Delong will convert the Singapore dollar bonds into 43.75 million shares and $19 million in cash plus net proceeds from the sale of a property owned by King Full Investments Ltd. a company owned by Ding Liguo and Zhao Jing.

Holders will have the right to put 20% of the shares back to the company annually in each of the first six years. After six years and up to 10 years, the company has a call option to request a purchase of the shares.

Meetings

Delong is a Beijing-based steel manufacturing and trading group.

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