At this point, Modern Animal Husbandry, a milk source company that was originally hatched by Mengniu Dairy, returned to the mother after the equity divestiture and independent listing.
In the process of overseas red chip listing and restructuring, the core link is the acquisition of equity of domestic companies by overseas companies to be listed. However, because the cross-border equity payment arrangement in the Provisions on Merger and Acquisition of Domestic Enterprises by Foreign Investors (commonly known as "Document 10") has not been approved, the payment method must be cash in foreign currency. However, most of the domestic founders or shareholders who set up overseas companies have no foreign currency cash to use abroad, which makes the source of funds for overseas companies to acquire domestic companies a difficult problem for many China companies preparing to go public overseas.
Generally speaking, there are two ways to solve the problem of purchasing funds, one is equity financing and the other is debt financing. If equity financing is adopted, because investors see that the company is in urgent need of money, the price is often low, and founders or shareholders are often unwilling to dilute the equity again, even less willing to dilute the equity at a low price. In this way, debt financing through borrowing has become a preferred way. In fact, the purpose of shareholders' borrowing is to build a bridge of equity structure needed for listing. This kind of financing is really a veritable "bridge loan".
How to arrange the transaction structure of bridge loan in overseas listing and reorganization? The practice of Mengniu's acquisition of modern animal husbandry shows us this transaction process in general.
Cross-border reorganization of modern animal husbandry
The predecessor of modern animal husbandry is called leading animal husbandry. On July 7, 2008, Modern Animal Husbandry was established and acquired all the shares of leading animal husbandry. Later, it directly acquired the subsidiaries and assets of the leading animal husbandry, resold the leading animal husbandry to Qingdao Fonterra Company, and withdrew from the whole group. In order to raise funds for business expansion, Modern Animal Husbandry conducted several reorganizations and four rounds of equity financing from October 2008 to June 2009, and introduced a trust plan established by KKR, CDH and Niu Gensheng as investors. These investors subscribed for 50.05% equity of Modern Animal Husbandry for about 65.438+37.9 million yuan.
After completing the above actions, although the overseas company Aquitair has realized the holding of the domestic modern animal husbandry company (Figure 1), another key step has not been completed, and the individual shareholders of modern animal husbandry have not realized the overseas shareholding. If you go public at this time, it has nothing to do with these shareholders, which is obviously unacceptable.
Then, how to realize the overseas shareholding of individual shareholders in China? The prospectus shows that modern animal husbandry takes two steps: onshore acquisition and offshore subscription. On the one hand, Aquitair Company acquired modern animal husbandry onshore, that is, it signed an equity transfer agreement with China individual shareholders Maanshan Xianxing Animal Husbandry and Niu Lao Animal Husbandry (hereinafter referred to as "China Selling Shareholders") on 20 10/7. Accordingly, Aquitair acquired the merger with the selling shareholders in China for 903 million yuan. On the other hand, on July 29th, 20 10, the company to be listed signed a subscription agreement with China Shareholder Holding Company (a holding company established overseas by the selling shareholders in China). On this basis, the former issued 4.876 million new shares to the latter, with a total price of 903 million yuan, and the total subscription price was equivalent to the onshore purchase price.
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The popular expression of the above description in the prospectus is: individual shareholders in China set up a series of China shareholder holding companies overseas (four shell companies: Jin Mu, Yin Mu, Mu Xin and Youmu); Then these companies take a sum of money (equivalent to 903 million yuan in foreign currency) to subscribe for the shares of the company to be listed; Then, after the listed companies get the money, they will inject it into Aquitair Company, which will acquire all the shares of Modern Animal Husbandry held by individual shareholders in China at a price of 903 million yuan. After such a cycle, on the one hand, individual shareholders in China will reach the level of overseas listed companies; On the other hand, overseas listed companies will hold the largest proportion of shares of domestic modern animal husbandry companies, and cross-border restructuring will be completed.
BOC International provides bridge loan.
So, where does the subscription fund of China shareholder holding company come from? According to the disclosure in the prospectus, China Shareholder Holding Company was provided with bridge loan of about US$ 65.438+39 billion by BOC International on 2065.438+0.00 654.38+0.00. Bridge loan's money has been paid by China shareholder holding company to the listed company on that day to fully pay the subscribed shares, and the overseas subscription has been completed. As the mortgage of bridge loan, the shares of China Shareholder Holding Company and its shares of listed companies have been mortgaged to BOC International.
This is the first step of the whole bridge loan transaction, the opening of the drama.
This sum of money was paid to the listed company of China shareholder holding company on 20 10+ 1 year 10. Then bridge loan's income has been transferred to the shore and paid to the selling shareholders in China, and the onshore acquisition was completed on 201kloc-0/65438. At this point, the money has been transferred to individual shareholders in China.
At this stage, the acquisition of domestic rights and interests and the overseas shareholding of Chinese shareholders have been resolved, but the shares of the company to be listed held by Chinese shareholders have been pledged and a loan is owed to BOC International. This debt is bridge loan. Because only the shares are pledged, the annual interest is usually between 65,438+00% and 65,438+05%, and the cost is very high. Therefore, usually, the transaction arrangement in bridge loan is not over yet, and the company will seek to borrow low-cost funds from commercial banks to return them to bridge loan in whole or in part.
"Domestic Insurance and Foreign Loan" Repays bridge loan
Judging from the information disclosed in the prospectus, this is how modern animal husbandry works. It claims to repay bridge loan in part before the listing date, and refinance the term loan provided by Bank of China Macau Branch, totaling about 65.438+300 billion US dollars. The term loan financing is mortgaged by the collateral provided by the selling shareholders in China (except the share pledge). In the case of modern animal husbandry, BOC Macau Branch only borrowed $65.438+300 million from China shareholder holding company, or BOC International did not agree to repay all the loans in one lump sum. The remaining outstanding balance of about $9 million will be fully repaid by selling part of the shares held by China shareholder holding company before the global offering after listing, and the share pledge will be released on the eve of listing (usually before the opening of the market on the listing date).
Then, what mortgage can China's $65,438+300 million refinancing shareholders take for selling shares? The prospectus doesn't say it, but it can basically be inferred that it is the usual practice of "internal insurance and foreign loans" (it is only inferred here, which does not mean that modern animal husbandry has indeed adopted this financing method). That is, the shareholders who sell domestic shares in China will settle the equity transfer money received, and the RMB obtained from the settlement will be pledged to the domestic affiliated banks of overseas banks (such as a branch of China Bank); Then the mainland branch will issue a letter of guarantee or standby letter of credit to OCBC Macau Branch to provide guarantee for overseas borrowers (China shareholder holding company). Based on this guarantee, the loan amount of China Bank Macau Branch is the same as that of RMB pledged in China. Then, after the borrower gets the loan, it will be used to repay the high-interest bridge loan borrowed in the previous period, completing a cycle.
At this point, BOC International's early bridge loan was fully paid off, and the share pledge was released (usually, the shares are pledged to the following lender, namely Bank of China Macau Branch, but the bank will issue a letter of commitment, allowing the share pledge to be released before the trading starts on the day of listing), which became a sum of money owed by China shareholder holding company to Bank of China Macau Branch, and at the same time, individual shareholders of China pledged the corresponding RMB to their associated banks in China. Macao Branch will charge interest on loans, but at the same time, domestic branches will pay interest on deposits. Due to the low interest rate of overseas loans, in practice, the two usually offset each other, and the comprehensive cost of "domestic insurance and foreign loans" is basically zero. In this way, the financial cost actually borne by shareholders to solve the problem of acquisition funds is greatly reduced. "Domestic insurance and foreign loans" is the climax of the whole trading chain in bridge loan.
However, why should we introduce the new role of Bank of China Macau Branch to provide loans instead of directly providing "domestic insurance and foreign loans" by BOC International, which previously provided bridge loan?
Taking modern animal husbandry as an example, on the one hand, BOC International itself is not a commercial bank, so it is inconvenient to operate; On the other hand, more importantly, there is a provision in the Notice of the State Administration of Foreign Exchange on the Administration of External Guarantees of Domestic Institutions (Huifa [2065438+00] No.39) issued on July 30, 20 10, that is, "providing financing external guarantees for overseas investment enterprises".
That is to say, even if the early bridge loan was not provided by BOC International, but by a commercial bank, such as Bank of China Hong Kong Branch, the Hong Kong Branch could no longer repay the early bridge loan by lending to the shareholder holding company in China through "internal insurance and external loans". Since the previous loan was used to acquire domestic equity, if China shareholder holding company repays the previous bridge loan with the loan under "domestic insurance and foreign loan", it is very obvious that the funds of "domestic insurance and foreign loan" indirectly flow back to China, which is in conflict with the above provisions and has greater compliance risk.
On the contrary, if another overseas bank is introduced, one transaction in essence will be skillfully transformed into two transactions in form. For example, another China shareholder holding company, B (Modern Animal Husbandry has four China shareholder holding companies, and in practice, for compliance reasons, the company that "guarantees internally and lends externally" is usually two different companies from the company that borrowed from the bridge in the previous period) can be used to conduct "guarantees internally and lends externally" business with Bank of China Macau Branch. Another transaction is a share pledge loan transaction between China shareholder holding company A and BOC International. Thus, the naked touch of the above terms is avoided to a certain extent, and the compliance risk is reduced.
Then, how to repay the loan under "internal insurance and external loan"? In practice, there are usually two ways, one is to distribute dividends to overseas shareholders through domestic companies such as Modern Animal Husbandry before or after listing, and the other is to sell shares at the time of listing (Hong Kong allows shareholders to sell old shares at the time of listing) or after listing and repay them in cash. Fortunately, the comprehensive cost of "domestic insurance and foreign loans" is basically zero, so the loan cycle can be extended to a long enough time to solve the repayment problem.
After the repayment of "foreign loan" under "domestic insurance and foreign loan", the "internal insurance" can be lifted at the same time, and shareholders can freely use the RMB obtained from the share conversion. This is the end of the trading chain. At this point, a complete red-chip listing cross-border restructuring bridge financing transaction cycle has been completed.