not see investors joining the deal
specifically for that reason,” said
a person close to the deal.
Green funds may need
more time to study CBs, given
that only the bond portion is
certified, while the equities upon
conversion are not.
The majority of the Sumitomo
CB went to CB-oriented
investors, including outright and
hedge funds, which have more
knowledge about the product
than SRI funds that are generally
more active in the Green bond
arena. Equities investors and
fixed income currencies and
commodities investors took up
the rest of the deal.
Geographically, about half the
demand was from Europe, one-
third from US offshore and the
rest from Asia.
NOT YET A TREND
Daiwa, the sole bookrunner for
the Sumitomo CB, hopes the first
Green CB will set a precedent.
But Japan ECM bankers say that
it is unlikely to become a trend.
“To issue a Green CB, issuers
need to have good use of
proceeds for a green purpose and
also have the support of green
investors. Not many issuers can
meet these conditions,” said a
banker based in Tokyo.
Some equity-linked bankers
covering Asia Pacific ex-Japan
markets got a lacklustre response
from issuers when they pitched
the Green CB idea.
“We did pitch but the issuers
were not keen. They don’t want
the hassle of being green if it
won’t help much on pricing,” said
one of the bankers. “However,
some issuers may still do it for
raising profile or publicity.”
Japanese issuers have been
keen to sell Green bonds to
meet increasing demand
from investors, and to qualify
for a recently introduced
subsidy from the environment
ministry to alleviate the cost
and administrative burden of
issuing the bonds. However, it is
understood that the ministry has
not decided as yet whether the
subsidies also apply to CBs.
Sumitomo is understood to
have spent about ¥5m–¥6m to
obtain the green certification.
Sumitomo Forestry shares
fell 5.7% to close at ¥1,722 last
Wednesday before rebounding to
¥1,811 by the end of the week.
The CB carries a lock-up of 180
days for the issuer.
Nomura and SMBC Nikko were
the joint lead managers. Iron Man firm
faces stark time
Bonds Chinese film producer caught up by financing
freeze, poor governanceBY INA ZHOUDMG ENTERTAINMENT AND MEDIA,
the Chinese company that
co-produced Iron Man 3, has
defaulted on its onshore bonds
after a series of dramatic events
that strained its finances.
The Shenzhen-listed company
said last Monday that it had
failed to repay Rmb400m
(US$58.2m) of 365-day notes due
on September 8 as a result of
declining revenue and financing
difficulties.
The privately owned
company, co-founded by US film
maker Dan Mintz, co-produces
and distributes Hollywood films
in the highly regulated and
quota-based Chinese market.
One of DMG’s big hits was
Iron Man 3, which raked in
ticket sales of US$121m in
2013 in China, or more than a
quarter of the film’s global total,
according to film database Box
Office Mojo. Extra scenes were
added for Chinese audiences,
featuring popular performers
such as actress Fan Bingbing.
However, after delivering
three consecutive years of profit
growth since it went public in
late 2014 via a backdoor listing,
DMG Entertainment has seen its
fortunes turn sour this year.
Last month, it reported a 92%
year-on-year tumble in net profit
to Rmb21.7m in the first half
after a failed attempt to tinker
with its accounting practices.
In June, DMG proposed to cut
provisions for non-performing
accounts receivable, but later
withdrew the plan after it was
challenged by the Shenzhen
Stock Exchange.
It said the decline in profit
was partly due to delays in the
distribution of some unspecified
film and TV productions.
DMG and its executives also
seem to be facing a high level
of liquidity stress. As of the end
of June, 83.6% of the company’sshares had been pledged for
loans by several shareholders
including co-founder Peter
Xiao, who had a 66.9% stake.
In August, it was announced
that courts had frozen all of his
shares.
Xiao had cashed out part of
his stake earlier this year. He
sold a combined 10% to Anxin
Trust and an individual, Yu
Xiao Fei, in February and June,
respectively, for Rmb2.4bn.
On top of its financial
troubles, DCM also faces
governance issues. Following
the resignations of a number
of executives over the past
three years, Wu Bing, a former
Chinese gymnast and another
co-founder of the company, has
ended up performing the roles
of chairman, general manager
and board secretary, according
to company filings.
Mintz first travelled to China
in the mid-1980s to train in
martial arts and fell in love with
Wu, according to an interview
he gave to Forbes in 2012.
The two later moved to Hong
Kong and began collaborating
on action movies, the report
said. In 1993 Mintz set up DMG
with Wu and Xiao, the son of a
military officer.
In 2017, DMG announced
a plan to buy a 10% stake in
Forbes Media but later scrapped
it, blaming the complexity of
the transaction.
According to its latest
financial report, Chinese
sovereign investment arm
Central Huijin held 0.7%
unpledged shares in the
company at the end of June,
while a subsidiary of Shandong-
based coke producer Zhongrong
Xinda owned 0.9%. Zhongrong
Xinda was downgraded to B/B–
(S&P/Fitch) from BB–/BB– in July
because of its increased financial
leverage.
DMG did not return requests
for comment. For daily news stories
visit http://www.ifrasia.cominfrastructure funds was strong
with this class of investors
buying a majority of the units of
the Bt42bn IPO of BTS Rail Mass
Transit Growth Infrastructure
Fund in 2013 and half of Jasmine
Broadband’s IPO. However,
Digital Telecommunications
Infrastructure Fund sold its
Bt47.6bn IPO in 2013 to mainly
local institutional investors.
RISING RATE FEAR
A local banker said the IPO
may find favour with retail
investors as they are looking for
safe yield instruments and TFF
fits the bill. However another
ECM banker said even local
investors may not find the yield
attractive enough to buy.
Bank of America Merrill Lynch,
Finansa, JP Morgan, Krung Thai Bank
and Phatra Securities are working
on the IPO.
TFF will get revenues from
the Chalong Rat Expressway and
Burapha Withi Expressway.
“You have to give investors
some incentive as interest rates
are headed northwards. All
investors, local or foreign, are in
a mood to bargain,” the banker
said.
And none knows this better
than energy drinks maker
Osotspa, which has already
lowered its expectations. The
company opens books for
an IPO of Bt13bn–Bt16bn or
US$396m–$488m this week after
scaling back the original target
of US$500m–$600m as investors
were unwilling to pay for the
high valuations.
Around 506.7m primary
shares and 97m secondary shares
will be sold in the IPO.
Bank of America Merrill Lynch,
Bualuang Securities, JP Morgan and
Phatra Securities are the leads on
the float.