China Huiyuan Halted in Hong Kong After Report of Debt Covenant Breach
China Huiyuan Juice Group Ltd., the drinks maker Coca-Cola Co. proposed to buy before being blocked by Chinese regulators, was halted in Hong Kong trading today after a report it breached loan covenants.
China Huiyan plunged as much as 11 percent before being suspended. The company is seeking to amend the covenants for a $250 million three-year loan after breaching the terms, Reuters said, citing three unidentified bankers involved in the deal. The drinks maker is offering a 50 basis point waiver fee to 18 lenders as it seeks to loosen covenants to allow higher debt ratios and lower multiples of interest cover, Reuters said.
Since Coca-Cola’s bid was blocked in March 2009 by China’s Ministry of Commerce, Beijing-based Huiyuan has faced increasing competition for sales as international soft-drink makers step up investment to win customers with beverages that cater to Chinese tastes.
“News suggests that Huiyuan is actively seeking a waiver from lender banks and they will need 66.7 percent consent,” Jacqueline Ko, an analyst at Kim Eng Securities (Hong Kong) Ltd., said in a note to clients today, affirming a “sell” rating on the stock. “We dislike its slow earnings visibility, its ongoing aggressive capacity expansion with its low utilization rate,” Ko said.
Huiyuan Chief Financial Officer Francis Ng didn’t immediately return phone calls to his office from Bloomberg News.
The company had a market value of HK$8.2 billion ($1.1 billion) before being suspended. The stock was trading 5.9 percent lower at HK$5.58 when it was halted.