Hong Kong television broadcaster TVB sets up task force to recover the bond default that pushed it into its first financial loss since 2008
- TVB said it has set up a task force to explore all options to recover the US$106 million lost through two bond investments in SMI Holdings
- The investments forced TVB to write off HK$500 million last year, pushing it into its first financial loss since at least 2008
Television Broadcasts Limited (TVB), Hong Kong’s dominant free-to-air terrestrial television provider, said it has set up a task force to recover US$106 million lost through two bond investments in SMI Holdings.
In hindsight, “something wrong must have occurred” with the bonds being in default, said TVB’s chief executive officer Mark Lee Po On, after the broadcaster’s annual shareholder’s meeting at its head office in Tseung Kwan O. “We could not see that in our due diligence process, so this is very unfortunate.”
Hong Kong-based SMI is a producer and distributor of movies and television dramas, one of the two majority shareholders of cinema operator Chengdu Runyun Culture Broadcasting.
TVB bought US$23 million of SMI’s unsecured redeemable fixed coupon bonds in April 2018, followed by US$83 million of secured redeemable convertible bonds in May, both due in 2020 with one year extensions. Four months after the investments, trading of SMI shares was halted on September 3.
The company, whose shares remain halted, has a HK$77.6 million convertible bond due on May 31. Senior executives resigned and it admitted to owing over HK$300 million in salaries and outstanding cinema rents, and 150 million yuan (US$21.7 million) for licensing fees.
“In early 2018, we had plenty of idle cash which we used to invest, or put in bank deposits,” Lee said. “It was difficult to foresee what would happen in the future, including market changes or business changes.”
Recent investigations by TVB found that both majority shareholders – SMI and private investment holding company Shenzhen Xingmei Shengdian Culture Media Group, who own 43 per cent – pledged their holdings to other companies without informing the broadcaster, according to a May 14 filing.
TVB, whose biggest shareholder is Young Lion Holdings, is communicating with SMI through lawyers and that there “is no impact on ordinary business,” Lee said.
The task force, comprising members of TVB’s board will “consider all available options in recovering the amounts invested in these bonds,” Lee said, adding that his shareholders “would like for the company to make back as much money as possible.”
