BONJOUR HOLD (00653) intends to issue 210 million shares to its controlling shareholder Chen Jianwen for subscription.

Hello HOLD (00653) announced that on November 12, 2024 (after trading hours on the Stock Exchange), the company entered into a subscription agreement with subscriber Mr. Chen Jianwen, who conditionally agreed to subscribe and the company conditionally agreed to issue and issue 210 million subscription shares to the subscriber at a subscription price of HK$0.158 per subscription share (total amount of HK$33.18 million), to be paid by offsetting part of the amount owed of HK$33.18 million. As of the date of the subscription agreement, the outstanding principal amount and accrued interest under the shareholder loans amounted to approximately HK$74.585 million. Upon completion, the amount of HK$33.18 million under the shareholder loans should be considered as repaid. The subscription shares represent approximately 88.34% of the existing issued share capital of the company as of the date of this announcement and approximately 46.90% of the enlarged issued share capital after completion of 4.48 billion shares, assuming that the total number of shares issued (excluding the issued subscription shares) from the date of this announcement to completion remains unchanged. As of the date of this announcement, the subscriber is the chairman of the board, executive director, and controlling shareholder of the company, holding a beneficial ownership of 125 million shares, representing approximately 52.71% of the company's issued share capital, and therefore considered as a connected person of the company under Chapter 14A of the Listing Rules. As of the date of this announcement, the company owes the subscriber a total of HK$74.585 million in outstanding principal and accrued interest under the shareholder loans. Under the subscription agreement, the subscriber will pay the total subscription price of HK$33.18 million by offsetting part of the amount owed of HK$33.18 million. As of the date of the subscription agreement, the outstanding principal amount and accrued interest under the shareholder loans amounted to approximately HK$74.585 million. Upon completion, the amount of HK$33.18 million under the shareholder loans should be considered as repaid. Based on the company's indebtedness to the subscriber under the shareholder loans of approximately HK$74.585 million as of the date of the subscription agreement and the partial repayment amount of HK$33.18 million by offsetting the subscription price, the company expects a reduction of approximately HK$33.18 million in its net current liabilities after completion; the company's gearing ratio is expected to improve from 45.9% as of June 30, 2024, to approximately 39.55% immediately after completion; and the company's net asset position is expected to improve by approximately HK$33.18 million. Therefore, considering the company's current financial performance and financial position, the company believes that capitalizing the loans will allow the company to partially repay the shareholder loans (along with accrued interest) without obtaining additional bank borrowings or incurring additional financing costs, while preserving resources for general working capital and business development and improving the debt level to strengthen the company's financial position. While the subscriber has expressed confidence in the company's future business performance and their intention to capitalize the shareholder loans and increase their equity investment in the company, the company believes that the subscription of shares by the subscriber as the executive director and controlling shareholder of the company reflects the subscriber's confidence in the long-term and sustainable growth of the company, and their continued support will benefit the company's long-term business development. Given that the issuance and issuance of subscription shares through capitalization of loans will dilute the interests of the existing shareholders of the company (excluding the subscriber), the directors have considered alternative methods of financing to repay the shareholder loans, such as debt financing and bank borrowings, as well as various equity financing methods such as rights issues, public offerings, and placement of shares. Regarding debt financing and bank borrowings, one of the reasons for capitalizing the loans is to improve the company's debt level, which may not be achievable through debt financing; the company has contacted its major banks in Hong Kong to obtain additional bank financing, with interest rates ranging from approximately 7.625% to 8.625% per annum (subject to internal review and approval processes), estimating that obtaining additional bank borrowings annually to repay the shareholder loans will result in at least HK$2.75 million in financing costs. In other words, compared to the interest expense of approximately HK$0.99 million that would be incurred under the shareholder loans (at an annual interest rate of 2.75%), the company estimates an additional financing cost of at least HK$1.76 million per year; capitalizing loans would not incur any interest expenses or other costs (excluding professional fees and related expenses of approximately HK$0.5 million for the subscription); considering the company's financial condition, obtaining additional bank borrowings may be difficult, uncertain, and time-consuming; and bank borrowings typically involve asset and/or securities pledges, which could reduce the company's flexibility. Therefore, the company believes that debt financing and bank borrowings are not feasible financing options for the company. As for equity financing, considering that rights issues or public offerings generally take at least five to six weeks, and may involve lengthy discussions with potential underwriters; could result in additional costs (including but not limited to underwriting commissions and other professional fees); given the company's recent financial performance and financial condition, current share price and trading volume, and market sentiment, without offering significant discounts to attract subscriptions, the company may have difficulty engaging placement agents for share placements or hiring underwriters for rights issues/public offerings; and rights issues, public offerings, and new share placements may involve underwriting uncertainties and market risks, the company believes that equity financing is not a feasible financing option for the company. Therefore, while capitalizing loans and the subscription involve dilution of the existing shareholders' equity, the company believes that capitalizing loans and the subscription are the best financing options compared to the above financing methods, taking into account the following circumstances: the subscriber has indicated their intention to capitalize the shareholder loans and increase their equity investment in the company, reflecting their confidence in the company's future business performance; as of June 30, 2024, the company's net current liabilities were approximately HK$92.40 million and capitalizing loans will reduce the company's debt and financial burden; upon issuance of the subscription shares, the partial repayment amount of HK$33.18 million will be settled without any cash outflow from the company (excluding professional fees and related expenses for settling the subscription of approximately HK$0.5 million, representing approximately 1.51% of the total subscription price); and therefore, capitalizing loans will lead to an improvement in the company's financial position.Improve the asset-liability ratio of the Shanben Group and enhance the financial situation of the group.Due to the subscription price being paid partially by offsetting part of the amount owed by the subscriber, there will be no net proceeds from the issuance of the remaining subscribed shares available for the company to use.