Price for back-door entry into HKEx rises
Cost of short cut to trading on HK exchange now as much as HK$180 million, still seen as cheap for mainland firms amid IPO suspension
Mainland firms seeking a back-door listing as a short cut to trading in Hong Kong's internationally renowned stock exchange have to pay up to HK$180 million, almost six times that of 2006.
The suspension of initial public offerings by mainland authorities means more companies from across the border are expected to seek back-door listings here, which are seen as a cheaper alternative to the formal listing process.
That is good news for shareholders and creditors of troubled companies undergoing provisional liquidation, according to veteran liquidator Derek Lai, the Asia-Pacific leader of restructuring services at Deloitte Touche Tohmatsu.
[A back-door listing deal] is a win-win situation for everyone
Hong Kong Exchanges and Clearing statistics show there are 11 suspended companies undergoing restructuring that have applied to resume trading. Since 2006, such relistings have included Fu Ji Food and Catering Services, Ocean Grand Chemicals, 3D Gold and Mansion House.
"A listing status in Hong Kong is one of the most valuable assets of many listed debt-ridden companies put under provisional liquidation. The higher the price paid by the white knight for their back-door listing, the more money the shareholders and creditors can get," Lai said.
In the case of Fu Ji Food and Catering Services, creditors received 20 per cent of what they were owed, with remaining debts translated into a 7 per cent share of the company.
In the case of Ocean Grand Chemicals' restructuring in 2008, creditors received 50 per cent of debt back in cash and shares.
In a back-door listing, investors buy the majority shareholdings of the target company and inject their own businesses into the listed unit. The original business and assets of the company are sold later.