Television Broadcasts (TVB)

TVB buys US$83 million convertible bond in mainland theatre operator SMI

PUBLISHED : Thursday, 03 May, 2018, 6:11pm
UPDATED : Thursday, 03 May, 2018, 11:00pm

Television Broadcasts (TVB), Hong Kong’s main free-to-air broadcaster, has bought a US$83 million (HK$651.55 million) convertible bond in mainland cinema operator SMI Holdings Group, according to a stock exchange filing on Thursday.

The bond has a principal of US$83 million with an interest rate of 7.5 per cent per annum for a term of two years, extendable to three years subject to the parties’ mutual agreement.

TVB can exchange the bond for shares at an initial conversion price of HK$3.85 per share. The conversion price represent a premium of about 13.24 per cent over SMI’s closing price Wednesday when the deal was made, and represents a 17.02 per cent premium over the average closing price in the previous five trading days.

“Taking into account that the interest rate of the convertible bonds is generally more favourable and higher than the interest rate of fixed deposits offered by well-recognised financial institutions in Hong Kong … the board considers that the convertible bond subscription can broaden the group’s source of income and provide the group with a stable investment return,” TVB said in the stock exchange filing.

“Accordingly, the directors, including the independent non-executive directors, consider that the terms of each of the transaction documents are fair and reasonable and the convertible bond subscription is in the interests of the company and shareholders as a whole.”

SMI, a listed company in Hong Kong which is 67 per cent owned by Qin Hui, operates cinemas, online shopping and in-theatre counter sales, as well as an advertising and promotions business in mainland China.

The theatre operator said the deal will net proceeds of about HK$650 million, which “offers a good opportunity to the group to maintain its financial position” and to expand its theatre business.

SMI plans to use HK$30 million from the fundraising to repay loans, HK$30 million for developing its existing business by increasing the number of theatres, and the remainder will go for general working capital.

TVB will hold about 5.86 per cent of the enlarged issued share capital of SMI if they opted for conversion of the bond.

TVB’s shares edged up 0.2 per cent to close at HK$24.90 on Thursday after announcing the deal. SMI’s shares ended unchanged at HK$3.40.

China is the second-largest film market in terms of box office receipts. However, many analysts predict China will overtake the US to become the No 1 film market in coming years.

In February, cinema ticket sales in China reached a record 10.05 billion yuan (HK$12.43 billion), which coincided with the Lunar New Year and the release of Operation Red Sea, directed by Hong Kong director Dante Lam.

The result eclipsed the North American record set in 2011 when Harry Potter and the Deathly Hallows - Part 2 and Transformers: Dark of the Moon boosted ticket sales during July to US$1.4 billion.