Shenzhen lender improves reform offer to shareholders

PUBLISHED : Thursday, 17 May, 2007, 12:00am
UPDATED : Thursday, 17 May, 2007, 12:00am

Shenzhen Development Bank, a mainland lender controlled by buyout firm Newbridge Capital, launched its second attempt at making all its equity tradable yesterday, increasing the compensation offered to independent shareholders in order to gain their approval to complete the regulatory requirement needed before further fund raising can be made.

The lender, in which Newbridge has an 18 per cent stake, said it would offer 140.9 million shares, or one for every 10 shares held, to holders of the 72 per cent of shares that are already tradable , .

It will also give them 208 million call warrants, or one share per 10. Half of the warrants, convertible into shares for 19.89 yuan, could be cashed in six months, and the remaining half in nine months.

The stock, which has risen in value by 92 per cent since the beginning of the year, last changed hands at 27.85 yuan before being suspended from trading on May 11 pending the share reform announcement. They will resume trading on May 25.

The bank is one of the largest firms that failed to complete its share reform before the end of the 2006 deadline set by the China Securities Regulatory Commission.

It had ordered that companies with non-tradable shares convert them, clearing up a legacy of the non-market economy.. The mostly state-owned holders of the shares have to compensate the other shareholders to gain their approval for the modification.

Companies with untradable share are prohibited from raising funds through new equity issues, which has made it difficult for the bank to keep its capital adequacy ratio at the required level, limiting its loan growth.

A General Electric unit has signed on as an investor once the reform is completed.

'The share reform and the possible capital injection will help the lender develop further,' said Zhu Yan, an analyst with Guosen Securities, in a report yesterday.

The lender first attempted the reform in July last year by offering a maximum 48 fen in cash per lot of 10 shares. But it was rejected by the independent shareholders.

The shareholders will vote on the second offer from June 6 to 8.

If they accept, Newbridge's stake in the bank will be diluted to 16.7 per cent.