SNP.L Regulatory News (SNP)

18 Apr 2007 07:00

China Petroleum & Chemical Corp18 April 2007 ("Sinopec Corp.") (a joint stock limited company incorporated in the People"s Republic of China with limited liability) PROPOSED ISSUE AND LISTING OF ZERO COUPON CONVERTIBLE BONDS DUE 2014 CONVERTIBLE INTO H SHARES OF SINOPEC CORP. AND RESUMPTION OF TRADING Proposed issue of convertible bonds Sinopec Corp. is pleased to announce that, on 17 April 2007, Sinopec Corp.entered into a subscription agreement (the "Subscription Agreement") with theManagers pursuant to which the Managers have agreed to subscribe or procuresubscribers for the Bonds to be issued by Sinopec Corp. in an aggregateprincipal amount of HK$11,700,000,000. Lehman Brothers Asia Limited and GoldmanSachs (Asia) L.L.C. are the Joint Bookrunners of the issue of the Bonds. The Bonds will be convertible into H Shares of Sinopec Corp. Completion of the Subscription Agreement is subject to the satisfaction and/orwaiver of certain conditions precedent as described under the section headed"Proposed issue of convertible bonds - The Subscription Agreement - Conditionsof the Subscription Agreement" in this announcement. In addition, theSubscription Agreement may be terminated under certain circumstances asdescribed under the section headed "Proposed issue of convertible bonds - TheSubscription Agreement - Termination" in this announcement. As the Subscription Agreement may or may not complete, Shareholders andpotential investors are advised to exercise caution when dealing in the Shares. The Bonds will be offered and sold to persons whose ordinary business involvesbuying, selling or investing in securities outside the United States in relianceupon Regulation S of the U.S. Securities Act of 1933 (as amended). None of theBonds will be offered to the public in Hong Kong nor will they be placed to anyconnected persons (as defined in the Listing Rules) of Sinopec Corp. Based on the initial Conversion Price of HK$10.76 and assuming full conversionof the Bonds, the Bonds will be convertible into approximately 1,087,360,560 HShares (subject to adjustment), representing approximately 1.25% of the totalissued share capital of Sinopec Corp. as at the date of this announcement andapproximately 1.24% of the enlarged issued share capital of Sinopec Corp. The H Shares to be issued upon conversion of the Bonds will be issued andallotted by Sinopec Corp. pursuant to the general mandate granted to theDirectors at the extraordinary general meeting held on 22 January 2007. The estimated net proceeds of the Bonds, after deduction of commission andadministrative expenses, are approximately HK$11.48 billion and will all be usedfor the repayment of Sinopec Corp."s existing foreign currency loans incurred inconnection with the privatization of its subsidiaries, Beijing YanhuaPetrochemical Company Limited and Sinopec Zhenhai Refining & Chemical CompanyLimited, which were previously listed on the Hong Kong Stock Exchange. Application has been made to the Hong Kong Stock Exchange for the listing of,and permission to deal in, the Bonds by way of selectively marketed securitiesand such permission is expected to become effective on or about 25 April 2007.The H Shares are listed on the Hong Kong Stock Exchange. Application will bemade to the Hong Kong Stock Exchange for the listing of the new H Sharesissuable upon conversion of the Bonds. Suspension and Resumption of Trading At the request of Sinopec Corp., trading in the H Shares on the Hong Kong StockExchange has been suspended with effect from 9:30 a.m. on 17 April 2007 pendingrelease of this announcement. Application has been made by Sinopec Corp. to theHong Kong Stock Exchange for the resumption of trading in the H Shares witheffect from 9:30 a.m. on 18 April 2007. PROPOSED ISSUE OF CONVERTIBLE BONDS Reference is made to the announcement and the circular of Sinopec Corp. dated 6December 2006 in relation to the proposed issue of the Bonds. THE SUBSCRIPTION AGREEMENT Date: 17 April 2007 Parties: (i) Sinopec Corp. (ii) the Managers To the best of the Directors' knowledge, information and belief having made allreasonable enquiries as at the date of this announcement, the Managers andinstitutional investors, and their ultimate beneficial owners are third partiesindependent of Sinopec Corp. and connected persons (as defined in the ListingRules) of Sinopec Corp. Subject to the fulfilment of the conditions set out below under the sectionheaded 'Conditions of the Subscription Agreement', the Managers have agreed, interalia, to subscribe or procure subscribers for the Bonds with an aggregateprincipal amount of HK$11,700,000,000. The Bonds will be offered and sold to persons whose ordinary business involvesbuying, selling or investing in securities outside the United States in relianceupon Regulation S of the US Securities Act of 1933 (as amended). None of theBonds will be offered to the public in Hong Kong nor will they be placed to anyconnected persons (as defined in the Listing Rules) of Sinopec Corp. The Bondswill not be offered in the United States, member states of the European EconomicArea, the United Kingdom, Hong Kong, Japan, The Netherlands, France, Italy, thePRC or Singapore unless such offer is pursuant to an exemption of, and otherwisein compliance with, the relevant statutory and financial regulations of thatjurisdiction. The Bonds will be offered or sold in accordance with allapplicable laws and regulations. The offer of the Bonds may be subject tostabilisation activities conducted in accordance with applicable laws andregulations. A Joint Bookrunner, as the stabilising manager, or any person acting on itsbehalf, may over-allot or effect transactions with a view to supporting themarket price of the Bonds at a level higher than that which might otherwiseprevail for a limited period, but in so doing the stabilising manager shall actas principal and not as agent of Sinopec Corp. However, there is no obligationon the stabilising manager to do this. Conditions of the Subscription Agreement Completion of the Subscription Agreement is conditional upon, among otherthings: (a) the Hong Kong Stock Exchange having agreed to list the Bonds (and the HShares to be issued upon conversion of the Bonds), subject only to the issue ofthe global certificate (as defined in the Subscription Agreement) representingthe Bonds (or in the case of the H Shares to be issued upon conversion of theBonds, the Joint Bookrunners being reasonably satisfied that such listing willbe granted); (b) a trust deed and a paying and conversion agency agreement having beenduly executed by the respective parties thereto (each in a form satisfactory tothe Joint Bookrunners); and (c) no rating agency having downgraded, nor given notice or made any publicannouncement of (i) any intended or potential downgrading of, or (ii) any reviewor surveillance with negative implications of, the rating accorded to any otherdebt securities of Sinopec Corp. Termination The Joint Bookrunners may, by notice to Sinopec Corp., terminate theSubscription Agreement at any time prior to payment of the net subscriptionmonies for the Bonds in any of the following circumstances: (a) if any of the conditions precedent specified in the SubscriptionAgreement have not been satisfied or waived by the Joint Bookrunners as providedtherein; (b) if there shall have come to the notice of the Joint Bookrunners anymaterial breach of, or any event rendering untrue or incorrect, any of thewarranties and representations contained in the Subscription Agreement or anymaterial failure to perform any of the covenants, obligations or agreements ofSinopec Corp. in the Subscription Agreement; (c) if, in the opinion of the Joint Bookrunners, there shall have occurredany of the following events: (i) a suspension or a material limitation intrading in securities generally on the London Stock Exchange plc, the New YorkStock Exchange, the Nasdaq National Market, the Shanghai Stock Exchange and/orthe Hong Kong Stock Exchange, (ii) a suspension or a material limitation intrading in Sinopec Corp."s securities on the Hong Kong Stock Exchange, theShanghai Stock Exchange, the New York Stock Exchange and/or the London StockExchange other than a temporary suspension due to the need to obtain clearanceof the announcement issued in connection with the issue of the Bonds or anyother business transaction of the Group or (iii) a general moratorium oncommercial banking activities in the United Kingdom, the United States, the PRCand/or Hong Kong declared by the relevant authorities or a material disruptionin commercial banking or securities settlement or clearance in the UnitedKingdom, United States, the PRC or Hong Kong; or (d) if, in the opinion of the Joint Bookrunners, there shall have been sucha change, or any development involving a prospective change, in national orinternational financial, political or economic conditions (including anydisruption to trading generally, or trading in any securities of Sinopec Corp.,on any stock exchange or on any over-the-counter market) or currency exchangerates or exchange controls or there shall have occurred any event or series ofevents (including the occurrence of any local, national or internationaloutbreak or escalation of disaster, hostility, insurrection, armed conflict, actof terrorism, act of God or epidemic) as would in their view be likely toprejudice materially the success of the offering and distribution of the Bondsat such time on terms and in the manner contemplated in the offering circularand the Subscription Agreement or dealings in the Bonds in the secondary market. Lock-up Undertakings Sinopec Corp. has, among other things, undertaken that neither Sinopec Corp. norany of its Principal Subsidiaries (as defined in the Subscription Agreement)over which it exercises management or voting control, nor any person acting onits or their behalf will, for a period from the date of the SubscriptionAgreement up to 90 days after the Closing Date (as defined in the SubscriptionAgreement), without the prior written consent of the Managers: (a) issue, offer, sell, contract to sell, pledge or otherwise dispose of(or publicly announce any such issuance, offer, sale or disposal): (i) any securities issued by Sinopec Corp. and having a maturity of morethan one year from the date of issue; (ii) any H Shares of Sinopec Corp. or securities convertible orexchangeable into or exercisable for H Shares of Sinopec Corp.; (iii) warrants or other rights to subscribe for or purchase H Shares ofSinopec Corp.; or (iv) any security or financial product whose value is determined directly orindirectly by reference to the price of the H Shares, including equity swaps,forward sales and options representing the right to receive any H Shares, savefor H Shares issued pursuant to the conversion provisions of the Bonds, or (b) engage in any transaction, arrangement or activity having an economiceffect similar to any of the activities set out in (a)(i), (ii) or (iii) above. Sinopec Corp. has also undertaken that it will procure that China PetrochemicalCorporation, the controlling shareholder of Sinopec Corp. shall execute alock-up agreement, whereby China Petrochemical Corporation undertakes not to,for a period from the Closing Date up to 90 days after the Closing Date: (a) (except with the prior written consent of the Managers) issue, offer,sell, contract to sell, pledge, encumber or otherwise dispose of (or publiclyannounce any such issuance, offer, sale or disposal) any H Shares held, directlyor indirectly, by such person as of such date (the "Relevant Shares"), or issue,offer, sell, contract to sell, pledge or otherwise dispose of any securitiesexchangeable for or convertible into or exercisable for the Relevant Shares,warrants or other rights to purchase the Relevant Shares or any security orfinancial product whose value is determined directly or indirectly by referenceto the price of the Relevant Shares, including equity swaps, forward sales andoptions representing the right to receive any Relevant Shares; or (b) enter into any other arrangement that transfers to others, in whole orin part, any of the economic consequences of ownership of the Relevant Shares. OFFER AND SALE The Bonds will be offered and sold to institutional investors. To the best ofthe Directors' knowledge, information and belief having made all reasonableenquiries as at the date of this announcement, the Managers and institutionalinvestors, and their ultimate beneficial owners are third parties independent ofSinopec Corp. and connected persons (as defined in the Listing Rules) of SinopecCorp. It is not expected that any investor of the Bonds will become substantialshareholder of Sinopec Corp. Therefore, the issue of the Bonds is not expectedto have any impact on the public float of Sinopec Corp. PRINCIPAL TERMS OF THE BONDS The principal terms of the Bonds, which will be constituted by a trust deed (the"Trust Deed") to be entered into between Sinopec Corp. and a trustee aresummarised as follows: Issuer of the Bonds Sinopec Corp.. Principal Amount The aggregate principal amount of the Bonds will be HK$11,700,000,000. Form and Registration of The Bonds will be represented by beneficial intereststhe Bonds in the global certificate, which will be registered in the name of a nominee of, and shall be deposited on the Closing Date with a common depositary for, Euroclear and Clearstream. Beneficial interests in the global certificate will be shown on, and transfers thereof will be effected only through, records maintained by Euroclear and Clearstream. Maturity Date On or around 24 April 2014. Issue Price 100% of the principle amount of the Bonds. Denomination HK$10,000. Interest The Bonds bear zero interest. Transferability The Bonds can be transferred without restrictions. Negative Pledge So long as any Bond remains outstanding (as defined in the Trust Deed), Sinopec Corp. will not, and will procure that no Subsidiary (as defined in the terms and conditions of the Bonds) will, create or permit to subsist any mortgage, charge, pledge, lien or other form of encumbrance or security interest upon the whole or any part of its undertaking, assets or revenues, present or future, to secure any International Investment Securities (as defined in the terms and conditions of the Bonds) or to secure any guarantee of or indemnity in respect of any International Investment Securities unless, at the same time or prior thereto, Sinopec Corp."s obligations under the Bonds and the Trust Deed (a) are secured equally and rateably therewith, or (b) have the benefit of such other security, guarantee, indemnity or other arrangement as the trustee of the Bonds in its absolute discretion shall deem to be not materially less beneficial to the Bondholders or as shall be approved by an extraordinary resolution. Status of the Bonds The Bonds constitute direct, senior, unsubordinated, unconditional and (subject to the provisions of the terms and conditions of the Bonds) unsecured obligations of Sinopec Corp. and shall at all times rank pari passu and without any preference or priority among themselves. The payment obligations of Sinopec Corp. under the Bonds shall, save for such exceptions as may be provided by mandatory provisions of applicable law and subject to the provisions of the terms and conditions of the Bonds, at all times rank at least equally with all of its other present and future direct, senior, unsubordinated, unconditional and unsecured obligations. Conversion Price Initially HK$10.76 per H Share, which will be subject to adjustment under the following circumstances: (i) consolidation, subdivision or reclassification of Shares, (ii) free distributions and bonus issues, (iii) general offers, (iv) rights issues, (v) capital distribution (including standard dividend protection), (vi) Change of Control and (vii) other dilutive events. Sinopec Corp. will engage independent investment banks, as experts, under certain circumstances to determine adjustment to the Conversion Price. The Conversion Price may not be reduced so that, on conversion of the Bonds, H Shares would be issued at a discount to their nominal value. H Shares issued on conversion will be fully paid and non-assessable and will rank pari passu in all respects with the H Shares in issue on the conversion date, including with regard to trading and settlement. The H Shares to be issued upon conversion of the Bonds will be issued and allotted by Sinopec Corp. pursuant to the general mandate granted to the Directors at the extraordinary general meeting of Sinopec Corp. held on 22 January 2007. The general mandate gives discretion to the Directors in the event that it becomes desirable to allot, issue or deal with any H Shares, up to a maximum of 3,356,097,600 H Shares representing 20% of the existing H Shares in issue. The general mandate has not been utilised as of the date of this announcement. Assuming a conversion at the initial Conversion Price of HK$10.76 per H Share, 67.6% of the general mandate will remain unutilised after full conversion of the Bonds. Cash Settlement In lieu of delivery of some or all of the H Shares required to be delivered upon exercise of a conversion right, Sinopec Corp. shall have the option to pay to the relevant Bondholder an amount of cash in Hong Kong dollars equal to the arithmetic average of the Volume Weighted Average Price (as defined in the terms and conditions of the Bonds) of the H Shares for each day during the 20 Trading Days (as defined in the terms and conditions of the Bonds) immediately after the date Sinopec Corp. provides a notice to exercise the cash settlement option, multiplied by the number of H Shares otherwise deliverable upon exercise of the conversion right under the Bonds in respect of which Sinopec Corp. has exercised the cash settlement option. Final Redemption Unless previously redeemed, converted or purchased and cancelled in the circumstances referred to in the terms and conditions of the Bonds, the Bonds will be redeemed on the Maturity Date at 121.069% of their principal amount. Redemption at the option of At any time after 24 April 2011 but not less than Sinopec Corp. seven business days prior to the Maturity Date, Sinopec Corp. may, having given not less than 30 nor more than 60 days" notice to the Bondholders, the trustee of the Bonds and the principal paying, conversion and transfer agent (which notice will be irrevocable), redeem the Bonds in whole or in part, provided that no such redemption may be made unless the closing price of the Shares, for any 20 Trading Days within a period of 30 consecutive Trading Days prior to the date upon which notice of such redemption is given, was, for each of such 20 Trading Days, at least 130% of the applicable Early Redemption Amount (as defined in the terms and conditions of the Bonds) divided by the Conversion Ratio (as defined in the terms and Conditions of the Bonds). If at any time the aggregate principal amount of the Bonds outstanding is less than 5% of the aggregate principal amount originally issued, Sinopec Corp. shall have the option to redeem such outstanding Bonds in whole but not in part at their Early Redemption Amount (as defined in the terms and conditions of the Bonds). Tax Redemption Sinopec Corp. may redeem all, but not some, of the Bonds at their Early Redemption Amount in the event of certain changes in PRC or Hong Kong taxation. Redemption at the option of On or around 24 April 2011, the holder of each Bond the Bondholders will have the right at such holder"s option, to require Sinopec Corp. to redeem all or some of that holder"s Bonds at 111.544% of their outstanding principal amount. Redemption upon delisting A Bondholder will have the right, at such or Change of Control Bondholder"s option, to require Sinopec Corp. to redeem in whole but not in part such Bondholder"s Bonds at their Early Redemption Amount, upon (i) the H Shares ceasing to be listed or admitted to trading on the Hong Kong Stock Exchange or (ii) the occurrence of a Change of Control with respect to Sinopec Corp. Listing Application has been made to the Hong Kong Stock Exchange for the listing of, and permission to deal in, the Bonds by way of selectively marketed securities and formal permission is expected to become effective on or around 25 April 2007. The H Shares are listed on the Hong Kong Stock Exchange. Application will be made to the Hong Kong Stock Exchange for the listing of the new H Shares issuable upon conversion of the Bonds. No application has been made for the listing of the Bonds on any other stock exchange. Use of proceeds The estimated net proceeds of the issue of the Bonds, after deduction of commission and administrative expenses, are approximately HK$11.48 billion and will all be used for the repayment of the existing foreign currency loans of Sinopec Corp. incurred in connection with the privatization of Sinopec Corp."s subsidiaries, Beijing Yanhua Petrochemical Company Limited and Sinopec Zhenhai Refining & Chemical Company Limited, which were previously listed on the Hong Kong Stock Exchange. REASONS FOR, AND BENEFITS OF, THE ISSUE OF THE BONDS Sinopec Corp. has considered other methods of financing such as issue of newshares, commercial bank loans and corporate debt issuance. However, the issue ofnew shares will have an immediate dilutive effective on the shareholding ofexisting shareholders. Bank loans and corporate debts usually have higherinterest rates which will increase Sinopec's cost of financing. ThereforeSinopec Corp. presently considers the issue of the Bonds the most appropriatefinancing arrangement for Sinopec Corp. as the issue of the Bonds would allowSinopec Corp. to further optimize its capital structure and reduce its existingcosts of financing. The Directors are of the view that the principal terms and conditions of theBonds and the Subscription Agreement are on the whole fair and reasonable andare in the interest of Sinopec Corp. and its Shareholders as a whole. EFFECT ON THE SHARE CAPITAL OF SINOPEC CORP. AS A RESULT OF CONVERSION Based on the initial Conversion Price of HK$10.76 and assuming full conversionof the Bonds, the Bonds will be convertible into approximately 1,087,360,560 HShares (subject to adjustment), representing approximately 1.25% of the totalissued share capital of Sinopec Corp. as at the date of this announcement andapproximately 1.24% of the enlarged issued share capital of Sinopec Corp. The following table summarises the effects on the shareholding structure ofSinopec Corp. as a result of the issue of the Bonds: Existing (as at the date of this Assuming the Bonds are fully announcement) converted into H Shares at the initial Conversion Price of HK$10.76 each Shareholder No. of Shares % of issued No. of Shares % of share capital enlarged of Sinopec share Corp. capital of Sinopec Corp. Sinopec Group Company 65,758,044,493 75.84 65,758,044,493 74.90 Bondholders - - 1,087,360,560 1.24 Public 20,944,394,507 24.16 20,944,394,507 23.86 ______________ ______________ __________________ ____________ Total 86,702,439,000 100.00 87,789,799,560 100.00 ============= ============= ============= ============ SUSPENSION AND RESUMPTION OF TRADING At the request of Sinopec Corp., trading in the H Shares on the Hong Kong StockExchange has been suspended with effect from 9:30 a.m. on 17 April 2007 pendingrelease of this announcement. Application has been made by Sinopec Corp. to theHong Kong Stock Exchange for the resumption of trading in the H Shares witheffect from 9:30 a.m. on 18 April 2007. INFORMATION ABOUT THE GROUP The Group is an integrated energy and chemical company with upstream, midstreamand downstream operations across the PRC and the Group's principal operationsinclude (a) exploring for and developing, producing and trading crude oil andnatural gas; (b) processing crude oil into refined oil products, producingrefined oil products and trading, transporting, distributing and marketingrefined oil products; and (c) producing, distributing and trading petrochemicalproducts. TERMS USED IN THIS ANNOUNCEMENT In this announcement, the following expressions shall have the meanings set outbelow unless the context requires otherwise: "Bondholders" holders of the Bonds "Bonds" HK$11,700,000,000 zero coupon convertible bonds due 2014 proposed to be issued by Sinopec Corp. convertible into H Shares of Sinopec Corp. "Change of Control" occurs when: (a) any person or persons, acting together, acquires Control of Sinopec Corp. if such person or persons does not or do not have, and would not be deemed to have, Control of the Sinopec Corp. on the Closing Date; (b) Sinopec Corp. consolidates with or merges into or sells or transfers all or substantially all of Sinopec Corp."s assets to any other person, unless the consolidation, merger, sale or transfer will not result in the other person or persons acquiring control over Sinopec Corp. or the successor entity; or (c) one or more other persons acquires the legal or beneficial ownership of all or substantially all of Sinopec Corp."s issued share capital "Control" means the acquisition or control of more than 50 per cent. of the voting rights of the issued share capital of Sinopec Corp. or the right to appoint and/ or remove all or the majority of the members of Sinopec Corp.'s board of directors or other governing body, whether obtained directly or indirectly, and whether obtained by ownership of share capital, the possession of voting rights, contract or otherwise "Clearstream" Clearstream Banking, societe anonyme "Closing Date" the date (expected to be on or around 24 April 2007) on which the Bonds are issued "Co-Lead Manager" China International Capital Corporation (Hong Kong) Limited and DBS Bank Limited "Conversion Price" means the price per H Share at which the Bonds may be converted into H Shares "Directors" directors of Sinopec Corp. "Domestic Shares" RMB denominated ordinary domestic shares with nominal value of RMB 1.00 each in the share capital of Sinopec Corp. and which are listed on the Shanghai Stock Exchange "Euroclear" Euroclear Bank S.A./N.V. "Group" Sinopec Corp. and its subsidiaries "H Shares" overseas listed foreign invested shares in the Sinopec Corp.'s share capital, with a nominal value of RMB 1.00 each, which are listed on the Hong Kong Stock Exchange "HK$" Hong Kong dollars, the legal currency of Hong Kong "Hong Kong" the Hong Kong Special Administrative Region of the People"s Republic of China "Hong Kong Stock Exchange" The Stock Exchange of Hong Kong Limited "Joint Bookrunners" Lehman Brothers Asia Limited and Goldman Sachs (Asia) L.L.C. "Joint Lead Managers" Lehman Brothers Asia Limited, Goldman Sachs (Asia) L.L.C., UBS AG, acting through its business group, UBS Investment Bank and ABN AMRO Bank N.V., Hong Kong Branch and NM Rothschild & Sons (Hong Kong) Limited, each trading as ABN AMRO Rothschild "Listing Rules" the Rules Governing the Listing of Securities on the Hong Kong Stock Exchange "Managers" the Joint Lead Managers and the Co-Lead Managers "PRC" for the purpose of this announcement, People"s Republic of China, excludes Hong Kong, the Macau Special Administrative Region of the People"s Republic of China and Taiwan "RMB" Renminbi, the legal currency of the PRC "Share(s)" Domestic Shares and H Shares of Sinopec Corp. "Shareholder(s)" holder(s) of the Shares "United States" or "US" the United States of America For and on behalf of the Board of Directors China Petroleum & Chemical Corporation Chen Ge Secretary to the Board of Directors Beijing, PRC, 17 April 2007 As at the date of this announcement, the directors of Sinopec Corp. are Messrs.Chen Tonghai*, Zhou Yuan*, Wang Tianpu#, Zhang Jianhua#, Wang Zhigang#, DaiHouliang#, Fan Yifei*, Yao Zhongmin*, Shi Wanpeng+, Liu Zhongli+ and Li Deshui+. # Executive Directors * Non-executive Directors + Independent Non-executive Directors This information is provided by RNS The company news service from the London Stock Exchange