Nantong LED project Tongfang shares invests 14 billion yuan in the country to launch radical transfusions

“The Nantong LED project will continue to expand its investment and the total investment will reach 14 billion, while CDB remains the bank with the most close cooperation.”

This is a company that seeks rapid expansion by building a debt wall and expanding its financial leverage. Since 2003, the asset-liability ratio of Tongfang’s shares (600100) has never been lower than 50%, and it has approached 70% at the end of last year.

Behind the high debt is a huge amount of bank credit. It is understood that the major blood donors of Tongfang (600100.SH) for many years include Bank of China (601988), China Construction Bank (601939), Bank of Communications (601328), Bank of Beijing (601169), Agricultural Bank of China (601288) and China CITIC Bank (601998). Wait. Thanks to their steady stream of credit support, Tongfang Stock has accelerated the pace of project expansion and market mergers and acquisitions.

Beginning in 2010, on the basis of continuing cooperation with the above-mentioned old faces, Tongfang shares and China Development Bank are getting closer and closer.

This stems from a large LED project in Nantong, Jiangsu.

Nantong LED project country launches radical blood transfusion
2008 is a key year for Tongfang shares. This year the market turmoil, stock prices plummeted, and the company made a decision to vigorously develop LED in the turmoil, after which the company's debt ratio has not yet come down.

“To do LED projects, the investment in the factory buildings and equipment in the early stage is too large, and it needs constant capital investment, and it is difficult to have a positive return in a short time,” said an LED industry analyst in Shanghai.

In May 2008, Tongfang Co., Ltd. raised 1.919 billion shares, including 800 million of which was used in the "High-bright LED (light-emitting diode) (LED) chip manufacturing and application industrialization" project. As of the end of 2010, the cumulative investment amounted to 549.12 million yuan, which will generate revenue in 2010. For -1163 million yuan.

On August 8, 2010, Tongfang Investment invested in building a comprehensive industrial base for high-brightness LED applications in Nantong, Jiangsu. According to reports, the total investment of the project is 6 billion yuan, and the investment in the first phase is 3 billion yuan. This is another major project for Tongfang to increase the LED production capacity of Tongfang after setting up LED chips and LCD TV LED backlight industrial bases in Beijing and Shenyang.

The ambition of Vice President Wang Lianghai is: "We will strive to become the nation's largest and third-largest chip supplier in the next three years."

Where does it come from for a large amount of money?

On the one hand, the company increased Jiangsu Nantong as the implementation site for the "high-intensity light-emitting diode (LED) chip manufacturing and industrialization application" share allotment project, and invested 172 million yuan in equipment purchases to invest in the wholly-owned subsidiary Nantong. Tongfang Semiconductor Co., Ltd. used the method only for purchasing equipment; on the other hand, the company issued bonds to raise 200 million. Obviously, these funds are still far from enough.

The 2010 Shareholders' Meeting reviewed and approved the "Proposal on Providing Guarantees for the RMB 2 Billion LED Project Credit Line Applied for Bank of China by Nantong Tongfang Semiconductor Co., Ltd.".

The first extraordinary shareholders' meeting in 2011 reviewed and approved the "Proposal on Providing Guarantees for the RMB 2 Billion LED Project Credit Line Applied by Nantong Tongfang Semiconductor Co., Ltd. to the National Development Bank."

The implementation of the above-mentioned credit policy is implemented by the China Development Bank Jiangsu Branch and the Bank of China Nantong Branch.

In 2010, Tongfang Co., Ltd. established its wholly-owned subsidiaries “Nantong Semiconductor Semiconductor Co., Ltd.” and “Nantong Tongfang Science and Technology Park Co., Ltd.” as the main players in implementing the Nantong LED project. As of the semi-annual report of 2012, the two banks provided a total of 1.663 billion loans to the two companies. The CDB offers mostly long-term loans for up to 10 years at an interest rate of 7.05%, while BOC mainly provides trade financing loans.

CDB naturally became the “guest guest” of Tongfang’s long-term borrowings. In its top five long-term borrowing rankings, CDB Jiangsu Branch accounted for the top three.

The in-depth cooperation between CDB and Tongfang’s shares began in 2005. On June 6th of that year, Tongfang and China Development Bank signed a total loan contract of 3.8 billion, including: soft loans of 0.45 billion yuan, hard loans of 3.35 billion yuan, for water and high Aluminum fly ash produces aluminum-silicon series alloys, its own intellectual property technology incubation and "going out" international cooperation and other projects.

With the cooperation of the Nantong LED project, CDB appears to be more active than BOC. As of the current 1.663 billion total loans, the National Development Bank Jiangsu Branch loaned 1.401 billion, while the Bank of China Nantong branch loaned 262 million.

"On the energy-saving projects, the current policy support is still very large. As a policy bank, CDB provides support for projects such as LED is also a matter of reason." An LED industry insiders said.

“48 sets of equipment are basically in place. Now it is in accordance with the production schedule, and it will enter the production stage of installation and commissioning,” said the representative of Tongfang Securities. Allegedly, 48 sets of LED epitaxial wafer production machines can bring about an annual output of 2.4 million high-brightness blue LED epitaxial wafers and supporting LED chip production capabilities.

However, in recent years, many companies have blindly invested, and the LED industry is facing the situation of overcapacity, rising costs, poor quality, and vicious competition in prices. It is called the “second photovoltaic”. In this environment, CDB strongly supports Tongfang’s shares in the expansion of LED production capacity. There will be great risks in the future and there will be greater uncertainty.

According to a Shanghai banking senior personage, “Nantong LED project will continue to expand investment, the total investment will reach 14 billion, and CDB is still the most closely-cooperated bank.”

Before that, CDB also gave strong support to PV companies. In 2010, it granted credit to LDK 600 billion. As a good example of its support for new energy strategies, Jiangxi Sevi has now been immersed in bankruptcy and breach of contract.

Cooperation with BOC for 12 years without interruption

Although Nantong LED project has been getting closer to CDB, the closest allies with Tongfang’s shares are actually Bank of China.

In 2000, the Bank of China gave Xinhua Tongfang 2 billion credits, and the cooperation has continued without interruption.

In 2007, the company raised a net amount of 1,228.80 million yuan through non-public issuance of stocks. The funds were deposited on July 27, 2007, and all of these funds were deposited in the special account of Bank of China Zhongguancun (000931) Science and Technology Park Branch 816603580508094001. In May 2008, the 1.919 billion funds raised by Tongfang’s share allotment were also deposited in the Zhongguancun Science Park branch of BOC.

The interests of the field have come and gone. Since then, the Bank of China has become even more ferocious towards the Tongfang. It has provided an endless supply of “bulletin grain” for the expansion of Tongfang’s shares and has also become the biggest supporter behind Tongfang’s high asset-liability ratio.

Judging from the credit line, in 2008 Tongfang received a total credit line of RMB 6.4 billion from banks, of which RMB 1.27 billion was provided by Bank of China, second only to RMB 2 billion from CCB. Since then, Tongfang has obtained a step-by-step increase in the total credit line of the bank each year. Since then, the Bank of China has become the bank with the largest amount of credit and has not been surpassed.

According to statistics, the company received a total of 13.9 billion yuan in comprehensive credit facilities from commercial banks in 2010, including 5 billion from the Bank of China; the total amount in 2011 was 17.506 billion yuan, and the Bank of China was 5 billion.

In 2012, TFL shares intend to apply for a total credit line of about 25.4 billion yuan to 16 commercial banks, and the Bank of China will continue to be 5 billion. The credit business scope includes working capital loans, letters of credit, bills, guarantees, factoring, etc., with a term of one year, and the guarantee method is credit guarantee.