Tianqi Lithium: How To Resolve The Crisis After A Brief Respite Of US $1.884 Billion Due Debt

November 30 was destined to be the busiest day for its securities department. It was not until 9:00 p.m. that Tianqi lithium's M & a loan extension announcement was officially released.

For this announcement, some investors think it is "the most favorable news released by the company throughout the year". However, there is no substantial change in the company's ability to repay the loan after the extension period of only 28 days. The company's stock price, which has remained strong recently, turned down after the opening of trading on December 1. On that day, Tianqi lithium's share price fell by 4.99% all over the world.

Perhaps, Tianqi lithium industry in the last minute to win the actual extension time may be shorter.

At present, Tianqi lithium and the syndicate have reached an agreement that the extension date of the loan syndicate shall be December 28, and the revised and restated loan agreement confirmed and signed by the syndicate agent bank shall take effect, and the time between the two is shorter.

At present, two different fates lie in front of Tianqi lithium: one is that when the ten billion debt is passed, Tianqi lithium will enjoy the dividend of the growth of new energy vehicles in the next few years as the world's three largest lithium companies; the other is that if this hurdle cannot be overcome, it will go into default and bankruptcy reorganization.

As for whether the company will resolve the crisis by selling assets or introducing war investment in the future, there is great uncertainty in the game and negotiation involving multiple interests.

Multi benefit game

On December 1, the constituent stocks of Shenzhen Stock Exchange 100 index were adjusted, Ganfeng lithium industry (002460. SZ) was transferred in, and Tianqi lithium industry (002466. SZ) was transferred out. The two companies, known as the "two giants of lithium industry", have different destinies. The former has a market value of more than 100 billion recently, while the latter is deeply in debt.

In 2017, Tianqi lithium industry was the most brilliant in the last round of lithium industry boom. At that time, Jiang Weiping's family ranked among the top 100 rich in Hurun with a wealth of 27.5 billion yuan, ranking the third in Sichuan Province.

To some extent, Jiang Weiping has feelings. In 2018, when sqm was acquired, he was 63 years old and had a fortune of 19 billion yuan, but he was still willing to gamble on all his wealth. Was it just for money?

In the end, Jiang Weiping achieved his wish, and Tianqi lithium realized "one participation and one control" over the world's lithium mines and became an undisputed world lithium industry giant.

However, it is expensive to be a global lithium giant.

In order to acquire sqm, Tianqi borrowed $2.5 billion of M & A loans through the syndicate in 2018, of which $1.884 billion was due on November 29, 2020.

For the huge M & A loans, the company originally prepared a set of financing plans to support.

However, the plan did not change quickly, and some subsequent financing plans failed to be implemented. For example, the Hong Kong stock market was listed because the market price was too low before and the listing approval issued by the CSRC expired. Combined with the impact of lithium price decline, the company's capital has not improved significantly in recent two years.

"Including the local market in Sichuan, the company has also been seeking multi-party financing to prepare for debt repayment, but the amount involved is too large, and many fund holders do not have the corresponding strength." A local capital market person in Sichuan pointed out.

Until the final maturity date at the end of November this year, there is still no clear solution, and the US $1.8 billion debt can only be extended.

It is hard to say whether this result is good or bad. The success of the extension just won an extremely short respite.

According to the progress announcement issued on the evening of November 30, the syndicate agreed to extend the loan from the maturity date to the earlier of (1) December 28, 2020; and (2) the amended and restated loan agreement confirmed by the syndicate agent has come into effect.

"The company and the syndicate are further actively negotiating on the key terms of the amended and restated loan agreement. If the effective conditions for the extension under this extension letter cannot be fulfilled, the said M & a loan cannot be extended to December 28, 2020." Tianqi lithium said.

Knowing that the debt due is huge, why delay it again and again? This may be related to the multi-party game among listed companies, syndicates and investors.

The 21st century economic reporter learned from relevant channels that Tianqi lithium intends to introduce war capital to ease the pressure on funds, such as state-owned enterprises with strong capital strength, but failed to reach an agreement on some core interests, such as the proportion of shares to be transferred.

The other way is to sell assets to repay debts. Tianqi lithium holds the shares of sqm and talison, the two major lithium giants. There have been rumors of selling in the market. However, as a core asset that has paid a high price, it is unlikely to sell. Moreover, the dawn of lithium industry has gradually emerged.

Whether the game can achieve balance and breakthrough progress is the focus of attention in the next month, which is related to the actual solution.

Hope of Tianqi's regeneration

This debt rollover is reasonable.

On the evening of November 13, Tianqi lithium industry's suggestion of "the risk of failing to repay the principal and interest of a large amount of due debts" once triggered heated discussions among all parties in the market.

But for investors who have long been concerned about the company, who doesn't know that the company will repay such a large amount of debt? At that time, the uncertainty only existed in the level of whether the company could succeed in the extension.

Some details can show the syndicate's attitude towards corporate debt. For example, on June 30 this year, China CITIC Bank Chengdu Branch also added a new comprehensive credit line of no more than US $100 million for the company to pay talison the purchase price of lithium concentrate.

In this regard, individual investors from the front line of banks have successfully predicted that Tianqi lithium's debt will be extended.

The judgment is based on two aspects: firstly, the substantial overdue debt composition will lead to the disposal of the company's equity and assets, and the banks providing loans will face the pressure of large amount of write off, and all parties will lose. Secondly, Tianqi lithium has the willingness to repay, just because the cash is really tight and unable to repay.

Even if one day the company goes to the stage of bankruptcy reorganization, Tianqi lithium industry, relying on the resource advantage in hand, does not seem to worry about the capital side to take over the offer.

First, talison, which was acquired by the company in 2013, owns the Greenberg mine in Western Australia. In 2018, the ore grade of the mine was the highest and the production cost of chemical grade lithium concentrate was the lowest in the world. From 2012 to 2018, talison was the world's largest supplier of technical grade lithium concentrate.

Under the background of the sharp decline of lithium price in 2019, the gross profit rate of lithium concentrate products of Tianqi lithium industry did not fall below 68%, and even more than 70% in 2017 and 2018.

In addition, sqm mainly develops Atacama Salt Lake in Chile, which has the largest brine reserves in the world and is the highest grade brine resource in operation.

According to Roskill 2019 report, Tianqi lithium has become the third largest supplier of battery grade lithium carbonate in the world according to the sales volume calculation of the following tourists in 2018.

It should be pointed out that the grade of lithium ore resources determines the quality of lithium carbonate and other products. After the intensive M & A in the last business cycle, the upstream high-quality lithium resources have been completely divided.

As far as the lithium industry is expected to rebound in the second half of the year, the domestic lithium industry has seen a gradual decline in supply.

Altura, one of Australia's top five lithium producers, has entered bankruptcy proceedings in October this year, following the closure of several Australian lithium producers in 2019.

The average battery price of Sichuan battery was RMB 80000 yuan / day, which was in the range of RMB 80000 yuan / day. By November 30, the mainstream price range in the market rose to between 44000 and 45500 yuan, and the average price rose to 44800 yuan / ton.

"The quotation of 45500 yuan, even 48000 yuan, is also available. At present, businesses generally feedback that the market is short of goods, and the actual transaction price needs to be discussed in detail." Business Club lithium carbonate industry analyst Qu Lin on December 1 said.

The reason lies in the contraction of supply and the concentrated release of domestic demand. In the first half of the year, the whole industry was obviously suppressed by the epidemic situation, while in the second half of the year, with the large volume of new energy vehicles, the demand driven obviously.

More importantly, the future development trend of new energy vehicles is clear. In addition to Tesla, Weilai, Xiaopeng and other new energy vehicle enterprises, a number of traditional automobile manufacturers including Volkswagen have also announced new energy development plans.

In particular, the huge market space that the "power exchange" mode may bring will provide support for the terminal consumption of lithium industry in the future.

The darkness before dawn.

It may be that the company is optimistic about the solution of Tianqi lithium's debt problem. In the near future, the company can still maintain a total market value of nearly 40 billion yuan.

According to statistics, in November this year, the top three increases in Shenwan's subdivided industries were rice wine, lithium and other alcoholic drinks. The rise of lithium industry is not only affected by the continuous soaring share prices of new energy vehicle companies, but also driven by the rebound of the current non-ferrous metal plate.

In terms of specific companies, Tianqi lithium industry became the biggest winner, with a cumulative increase of 40.56% in November, while Ganfeng lithium and Zhongkuang resources (002738. SZ) increased by 28.58% and 19.18% in the same period.

At the critical stage of Tianqi lithium's debt maturity, foreign institutions are buying against the market.

On November 25, the number of shares held by northbound capital reached 63.3973 million shares, accounting for 6.72% of the company's free circulation share capital, a record high since the opening of the mainland stock connect.

Is northward capital a big gamble?

Not really. Compared with ordinary investors, overseas investment institutions have certain information advantages.

The reporter of 21st century economic report noted that in an investor forum, some investors have transmitted the news from overseas media that "the bank has agreed in principle to extend the term, and the key regulation and control is still under negotiation".

However, this can not avoid the potential risk points and uncertainties.

First of all, if we choose the way of war investment to resolve the crisis, Tianqi lithium's current debt scale is too large to be borne by ordinary enterprises, and the war investor needs to have very strong capital strength.

Assuming that the war investor enters and invests 10 billion yuan, it is bound to demand more interests, such as controlling equity? How many shares will Jiang Weiping transfer? How to balance the two?

Secondly, although Tianqi lithium has no problem with its own operation status, if the debt problem is not solved, high financial expenses will exist one day, which will continue to swallow up the company's operating profits.

Take the first three quarters of this year as an example, Tianqi lithium's financial expenses were 1.286 billion yuan, and there was a loss of 1.103 billion yuan in the current period. This is the second consecutive year of loss for the company, and it will face the risk of suspension of listing in 2021.

Thirdly, although the prosperity of lithium industry in the second half of the year has improved significantly, the upstream capacity is still clearing up. However, if the lithium price continues to rebound in the future, will the upstream supply side increase again?

Today, there are still many uncertainties in Tianqi lithium's debt resolution, which is likely to be a repeated and tortuous process.

Although the position of northbound capital, which once held a record high, has been reduced for three consecutive trading days.

Until the company fails to provide a clear solution to the debt, everything is unknown.

?