Gome retail debt-to-equity swap, Huang Guangyu’s shareholding will drop to 19.33%

Gome Retail (00495.HK) announced the debt-to-equity swap plan on the evening of January 2, 2023. The creditor, Media Asia International Capital Co., Ltd. (hereinafter referred to as the creditor), which owes about HK$416 million in advertising fees, intends to subscribe for Gome with the debt amount. Retail additionally issued shares at a subscription price of HK$0.1023 per share, which will account for 10.21% of the total share capital of Gome Retail after subscription.

On December 30, 2022, Gome Retail entered into an agreement with creditors (hereinafter referred to as the agreement). Accordingly, Gome Retail agreed to capitalize the debt owed to creditors, and the creditors agreed to subscribe for approximately 4.063 billion new shares issued by Gome Retail at an issue price of HK$0.1023 per share, which is 0.11% higher than the closing price of Gome Retail on December 30, 2022. The HKD/share discount is about 7%.

The capitalized shares represent approximately 11.37% of the existing issued share capital of Gome Retail, and approximately 10.21% of the issued share capital of Gome Retail after the issuance of the capitalized shares. The issuance of the Capitalization Shares is subject to the approval by the Hong Kong Stock Exchange for the listing of, and permission to deal in, the Capitalization Shares. If the conditions for debt capitalization are not met on or before January 31, 2023, the agreement will terminate.

After the debt-to-equity swap, Huang Guangyu, the controlling shareholder of Gome Retail, and parties acting in concert, will reduce their shareholding in Gome Retail to 19.33% from the previous 21.53%; creditors’ shareholding in Gome Retail will drop from the previous 0% to 10.21%; other public shareholders’ shareholding in Gome Retail will drop from 78.47% to 70.46%.

Gome Retail stated that due to Gome Retail’s liquidity problem, it can use debt capitalization to pay off the advertising fee of about 416 million Hong Kong dollars owed to creditors, which can allow Gome Retail to save cash resources for other purposes.

In order to alleviate the current capital and debt pressure of Gome Retail, Gome Retail announced on the evening of December 30, 2022 that Gome Retail entered into a loan agreement with Gome Management Co., Ltd. (a company wholly owned by Huang Guangyu) on the same day. Gome Management Co., Ltd. The company agreed to provide Gome Retail with an interest-free, unsecured loan of HK$130 million for an initial term of not more than six months, which may be extended.

Previously, Huang Guangyu’s company had provided 500 million Hong Kong dollars of interest-free unsecured loans to Gome Retail three times. As of December 30, 2022, the interest-free unsecured loan provided by Huang Guangyu to Gome Retail has increased to HK$630 million.

On the evening of December 30, 2022, Huang Xiuhong, executive director of Gome Retail, chairman of Gome To C business group, and Huang Guangyu’s younger sister, held her first live delivery event on the True Happy APP under Gome Retail, which lasted 3 hours The live broadcast attracted a total of 126,000 netizens to participate, and the transaction volume set a new high for Gome’s 2022 live broadcast activities.

Gome Retail announced on the evening of December 29, 2022 that its subsidiary Gome Electric had recently received a bankruptcy liquidation application from the court. The applicant claimed to recover the payment of 4.706 million yuan, but these claims and debts have not been confirmed by effective legal documents.

The first financial reporter learned that the two general managers of Gome’s two branches in Guangzhou and Shenzhen had resigned in December 2022. Facing the pressure of funds and store operations, Gome wants to turn to live broadcast e-commerce, seeking to “slim down” and save itself.