Hanergy link shakes investor confidence in Bank of Jinzhou IPO

December 07, 2015 08:04
Bank of Jinzhou's first attempt to list in Hong Kong was delayed in the summer when the market regulator requested more information about its ties to Hanergy. Photo: AP

City commercial lender Bank of Jinzhou will begin trading Monday having raised nearly US$800 million from investors.

But its road to market has been tricky thanks thanks in part to its relationship with Hanergy Thin Film Power Group Ltd., the controversial solar equipment maker at the center of a Hong Kong regulatory probe.

It is the second time the bank has tried to list this year after its first attempt was delayed in the summer when the Hong Kong market regulator requested more information about its ties to Hanergy.

The bank’s eventual initial public offering was priced near the bottom of the indicative range offered to investors, the Wall Street Journal reports.

While other bank IPOs in Hong Kong have recently achieved weak valuations, Bank of Jinzhou is also unusual in having attracted only one cornerstone investor.

Such investors typically commit to holding shares in a company for at least six months after its listing, giving other investors confidence to back the IPO.

In recent Hong Kong finance sector IPOs, cornerstones have often contributed over half of the funds raised: Last month, for example, Bank of Qingdao set a record with over 70 percent of its US$607 million IPO coming from cornerstones.

Since the first delay to Bank of Jinzhou’s IPO in the summer, its advisers have had to work hard to ensure it provided more transparency over its relationship with clients such as Hanergy, according to one banker familiar with the deal.

“[For these banks] to recapitalize and raise new capital, there is a great challenge for an investor to understand the individual bank’s loan book and credit transparency,” said Marshal Nicholson, head of equity capital markets Asia ex-Japan with Nomura.

The relationship between Bank of Jinzhou, Hanergy and one of the solar-panel maker’s few known customers, Baota Petrochemical Group Co., has come to light in dribs and drabs.

Last week, Hanergy said it canceled contracts to supply equipment to two customers, one of which is Baota, after they missed a deadline to pay for at least 80 percent of their purchases.

Baota, through a subsidiary, is a major shareholder in the Bank of Jinzhou. The bank, in turn, is one of Hanergy’s lenders.

The solar-panel maker had shot to prominence earlier this year after a stellar rise in its shares at one point gave it a market value of more than US$48 billion -- well above that of Sony Corp., making its founder and chairman Li Hejun on paper China’s richest man -- even though the company’s solar panel market share has long been tiny.

In March, Hanergy announced a deal to sell US$1.32 billion worth of solar manufacturing equipment to Baota.

In April, the Bank of Jinzhou said in its first IPO application that Baota, through a subsidiary, was one of its major shareholders, with a 4.5 percent stake.

On May 20, Hanergy suspended trading of its shares at its own request after its stock price plunged 47 percent in a matter of minutes.

Soon after, Hong Kong stock market regulator, the Securities and Futures Commission, said it was investigating Hanergy.

The SFC has been probing Hanergy’s finances and dealings with its parent company, Hanergy Holding Group Ltd., the Hong Kong unit’s primary customer.

That probe is ongoing. Li denied any corporate wrongdoing in a speech in September and said his company was the victim of short-seller attacks.

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