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 Franshion (HKG:0817) to inject RMB150M to Sanya dev project
 
CreateTime:2012-04-26     Source:chinesestock.org Editor:qulina
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Franshion Properties (HKG:0817) announced that it has entered into a cooperation agreement with Hainan LongHigh Industrial Group Company Limited (LongHigh Group) which sets out the rights and obligations of the parties with respect to a joint development project on the bank of Yanzao River of Yacheng Town, Sanya, Hainan Province, including capital injection, financing arrangement and loans.

For the capital injection, Franshion shall inject a sum of RMB150 million to the project company, Sanya Yazhouwan Economic Development Company Limited, as consideration for the acquisition of 51% of the equity interest in the project company. Prior to the capital injection, the project company is wholly owned by LongHigh Group. Following completion of the capital injection, the project company will have a registered capital of RMB160 million, including RMB81.6 attributed to Franshion and RMB78.4 attributed to LongHigh Group, representing 51% and 49% of the equity interest in the project company, respectively.

In addition to the capital injection, the parties estimated that an amount of RMB765.9 million will be needed for the land development project, which shall be funded by the project company by applying for bank loans with its own resources. If the fund needed for the project exceeds the estimated amount of RMB765.9 million and an additional shareholder's loan from Franshion is needed, Fanshion shall provide the shareholder's loan of the additional amount to the project company at an interest rate which is 50% higher than the benchmark rate promulgated by the People's Bank of China.

The project company has been negotiating with Sanya Municipal Government with respect to the grant of an exclusive primary development right of the land. The project is expected to be completed by the end of 2014. The land is a comprehensive development land, which is expected to be developed into a project consisting of hotels, residential properties, commercial properties and corporate headquarters.

As a pre-requisite to the cooperation requested by LongHigh Group, Franshion also agreed to provide to LongHigh Group a loan of RMB100 million within one month from completion of the capital injection, and a further loan of RMB200 million in one or more tranches after signing of the development agreement and upon written request by LongHigh Group.

The term of the LongHigh loans shall be no more than three years, and the interest rate shall be determined at 40% higher than the benchmark rate promulgated by the central bank of China.

Upon completion of the capital injection, the project company will become a subsidiary of Franshion. LongHigh Group, being a substantial shareholder of the project company, will become a connected person of Franshion. As such, the LongHigh Loans constitute a connected transaction of Franshion
 


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