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China Medical Technologies Inc. Message Board

  • resmith1988 resmith1988 Jan 17, 2012 10:30 AM Flag

    Defaulted on Debt today

    CMED which was in the grace period for paying their 6.25% debt ,missed the payment deadline on Jan 16,2012. They are in default. Because of cross defaults the rest of the company's debt will also default soon. What is going on????????is this the next Sino Forrest???

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    • If I was a holder of 6.25% notes due in 4 years that are way out of the money, what would I need to exchange? Nothing, why would I exchange? They only better deal is a 4% note cv into stock at $4 which is hugely dilutive to common holders. Straight debt would be at a higher coupon as this company is tainted. There will be no exchange.

      • 1 Reply to sage533
      • I wrote that in several weeks ago. Indeed, if the original owners of the bonds are still holding them, they would receive merely a longer term offer from CMED. But the point of restructuring is to find the new holders of the bonds. Maybe the majority of the debt holders sold (as there was significant volume on the secondary bond market). So, if one investor bought a bond with a face value of $1000 at $550, that investor would be willing to accept from CMED a redeemed valued of say $650 plus interest for a longer term bond. That is what CMED is trying to identify: who owns their bonds and what would be the price they are willing to sell the bond back to CMED.

    • Good info thanks--

    • But documents must have been sent to holders asking for exchange and there is no SEC doc. You can ask all day but holders can just say no. They have to pay interest.

    • If you are in negotiations to restructure debt you may be holding interest until parties agree or are smoked out?

      Only $2MM

    • I am afraid there is no other answer than misleading reports and a very clever one scam. You don't just stop paying interest as you know the outcome-- a $.25 stock.

    • Interest forebearance sent to holders awaiting restructuring. Fitch blew it.

      • 2 Replies to UHUH24
      • UHUH, even if that would be true, and CMED sent interest forbearance to its bondholders for 2013 bonds (the private deal), it should have announced that the majority of bondholders agreed with the forbearance. If no such action was specified in the indenture or the majority did not agree, CMED is in selective default.
        However, I find the phrasing in the Fitch PR in Reuters strange. How come "Fitch learned that no payment has been received". What is this? Did they even called CMED?
        On the other hand, CMED did pay the 2011 Nov bonds, some more than 10 mil USD, principal and final interest. Did they run out of money so that they could not pay about 2 mil USD? It is strange.

      • So what is the time frame of the 'interest forbearance' period that presumably has been granted during the debt renegotiation?

        Thks!

    • It is official....THEY DID DEFAULT per the ratings agency. Checkmate. Read the news release.

    • Like I already said but you did not understand, I did not read the prospect as it is not public so I can't comment on the 2016. You said you have read it. Certainly not on a public web site. You must have an electronic form from an investment bank. Paste from it here so that we could read it.

    • Dude what your referring to is Rule 144a...if a bond is a private placement they still have an indenture. Private placements require an accredited investor purchase them. I have read the indenture for this bond. Can't suspend...only 30 day grace period which has expired.

    • In general, you are right. But details give a different picture.
      CMED said in Dec 2010 that the 2016 notes are NOT registered under the Securities Act of 1933. That is not unusual. Many companies do that (reducing costs). SEC says that not all offerings of securities must be registered with the SEC. The most common exemptions from the registration requirements include: Private offerings to a limited number of persons or institutions;

      The 2016 bonds were a private affair with a small number of institutional investors. There is no prospect (as required by SA 1933). Just an update from the company that the deal will begin ("The final terms of the Notes will be determined at the time of pricing of the Notes") and when it was done (late Dec). Accordingly, we do not know the contract of the bonds. In a small introduction to bonds, like this one https://www.tradeking.com/education/bonds/bond-trading-introduction, you can find that "some bond contracts contain clauses allowing the issuer to suspend coupon payments without being considered in default, or have variable interest that can result in a coupon of 0% for some period of time".

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