September 5, 2014

China's food giant Sino Agro Food gets $25 million in new financing

Chinese agribusiness giant Sino Agro Food has announced that it has secured a US$25-million convertible note financing from Euro China Capital AB, a Nordic investment house.

Proceeds of the debt paper will be used to complete the company's existing 5-year plan. An integrated, diversified agriculture technology and organic food company, Sino Agro Food operates livestock farms and aquaculture businesses across China.

The convertible note carries a yearly interest rate of 10.5%, a term of 5½ years, and a conversion price of US$1.00.

The company said the note is "junior to any existing or new debt and does not restrict the company from adding any amount of new debt regardless of form, and neither does it restrict the company from any cash nor non-cash dividends to shareholders".

Senior Sino Agro Food officials will meet with Euro China Capital in Stockholm this month to agree on a plan on how to best create shareholder value.

Following the approval of the note, the company said it would stop issuing equity to its trade suppliers, except those that had been agreed to prior to the signing of the convertible note agreement.

It added that the company would "settle all remaining commitments of this kind during the third quarter." Sino Agro Food has outstanding shares of 170 million.

Solomon Lee, chief executive officer of Sino Agro Food, said the convertible note agreement

is "a major milestone" for the company," adding that the new financing would help Sino Agro Food complete the five-year investment plan that it started in 2010.

Euro China Capital's managing partner, Fredrik Danielsson, said an extensive due diligence was conducted on Sino Agro Food over the past two years. "And we are impressed by the operations that Mr. Lee and his team have managed to develop," Danielsson said.

He found it unfortunate that the company "had been unable to cost efficiently fund its impressive growth with the help of capital markets".

Mr. Lee said it was "painfully frustrating to see a constant dilution of the share count … as a means of financing the company's growth ambitions."

With this convertible bond, Sino Agro Food has vowed to never again use equity as currency to pay off its financial obligations.

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