Hoang Anh Gia Lai (HAG) mortgaged shares to secure a 500 billion loan for its subsidiary.

Hoang Anh Gia Lai guarantees a loan of 500 billion VND for Hung Thang Loi Gia Lai

Hoang Anh Gia Lai (HAG) has just announced the Board of Directors' resolution on credit loan guarantee for Hung Thang Loi Gia Lai Company Limited, a subsidiary of HAG. This is a credit limit of VND 500 billion with a term of 12 months to supplement working capital for Hung Thang Loi Gia Lai Company at Saigon Thuong Tin Commercial Joint Stock Bank - Sacombank Gia Lai Branch.

To secure this credit loan, Hoang Anh Gia Lai plans to use two measures to ensure debt repayment obligations. The first is to mortgage 30 million shares at Gia Lai Livestock JSC, owned by HAG.

Hoang Anh Gia Lai shares secured to secure a loan of 500 billion for its subsidiary, image 1 — Hoang Anh Gia Lai (HAG) mortgaged shares to guarantee a VND500 billion loan for its subsidiary (Photo TL)

The second measure is to commit to guarantee all debt repayment obligations for Hung Thang Loi Gia Lai at Sacombank Gia Lai branch arising from the Credit Contracts with the above VND 500 billion loan.

Hung Thang Loi is a subsidiary of Hoang Anh Gia Lai, managing many other subsidiaries including: Lo Pang Livestock Joint Stock Company, Dai Thang Agricultural Development Company Limited, Khan Xay Agricultural Development Company Limited.

Having to issue shares to pay off debt, HAG still intends to guarantee loans for subsidiaries

In April 2023, Hoang Anh Gia Lai failed to complete the private offering of 161.9 million shares registered with the State Securities Commission on January 17, 2023. The reason was that the issuance price was up to VND 10,500/share while the HAG code has never reached the par value of VND 10,000/share since October 2022.

With the offering price much higher than the market price, it is not difficult to understand why Hoang Anh Gia Lai cannot offer shares in this issuance.

However, the Board of Directors of Hoang Anh Gia Lai also announced that it will seek shareholders' opinions by August 10 on the new private share offering plan expected to be implemented in September 2023.

And according to the plan to use capital from the previous plan to issue 161.9 million shares, HAG will use 800 billion VND to supplement working capital through loans to Hung Thang Loi Gia Lai, 400 billion VND to supplement capital through loans to subsidiary Lo Pang Livestock Company and 500 billion VND to pay the principal of bonds lot HAGLBOND16.26.

If there is no change in the purpose of capital use, it is likely that HAG's share issuance to raise capital will still be to pay off debt and provide additional capital for the two subsidiaries.

Negative growth in the second quarter, HAG shares have not yet returned to par value despite the increase in pork prices

One notable point is that HAG's business results have been extremely good in the past 2 years, but it still has to delay bond payments and find ways to issue shares to increase capital.

In 2022 alone, HAG's revenue reached VND 5,110.8 billion, up 2.5 times compared to 2021. Profit after tax was also recorded at VND 1,124.7 billion, 9 times higher than the same period.

In the first quarter of 2023, HAG brought in revenue of VND 1,697 billion and profit after tax of VND 303.4 billion. However, the growth momentum turned negative and decreased in the second quarter. Accordingly, revenue in the second quarter reached VND 1,450 billion and profit after tax reached VND 101.6 billion.

HAG’s declining business results occurred in the context of rising pork prices in the second quarter, causing many livestock stocks to increase in price. Notably, DBC and BAF both increased in price by more than 30% compared to the beginning of the year.

However, although HAG's stock price has increased, it still only reached VND9,270/share on August 11, 2023. In addition, HAG is still under warning status by HoSE. With a price far from the par value of VND10,000/share like this, HAG's plan to issue hundreds of millions of additional shares to pay off its debt may face even more difficulties.

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