The house leaks together with night rain & unexpected discovery!

I have written many articles about Orange Sky (01132) in succession. I originally thought that this article could write some articles with relatively simple topics. How do I finally continue to write Orange Sky, just because Orange Sky just announced to Nanhai Holdings (00680) legal proceedings were initiated to recover the remaining balance of the sale of Orange China China totaling 252 million.

The origin of this balance stems from the relevant provisions of the “Cost and Payment” in the original sale agreement of Orange China.

1. At the time, the agreed price was 3.286 billion yuan, and there was an adjustment mechanism:

(i) The net debt value is adjusted, and the initial price will be further adjusted for each of the following items:

(a) if the net debt-bearing value in the audited account is greater than the net debt-bearing value in the settled account, increase the net amount of the negative debt;

(b) If the net value of the negative debt in the settled account is greater than the net value of the negative debt in the audited account, then the net amount of the negative debt is adjusted;

(ii) increase the cash withdrawal from the New Studio project from the 31st of March, 2016 to the date of the delivery; and

(iii) Subtraction If the delivery is completed after the 15th of September, 2017, the purchaser is required to pay the foreign exchange price for the Jiaxing Credit Co., Ltd. according to the proposed Jiaxing Credit Agreement.

In addition to this, there are provisions on “lease” that may trigger an adjustment to the price.

Lease

In accordance with the terms of the renewed terms of the sale and purchase agreement (the “Renewal Terms”), the resumption of the target is subject to the terms of the renewed terms of the sale and purchase agreement (the “Renewal Period”). The Group’s existing leases (“Existing Leases”) and the Vendors and the Purchasers are required to renew the existing leases on the terms of the parties’ agreement (the “Expiration Date”).

The term of the leases of certain cinemas as set out in the sale and purchase agreement (the “Agreement on Leases”) is not less than the lease terms of certain cinemas as set out in the sale and purchase agreement. A number of other lease agreements (“Other Leases”) for other cinemas (“Other Leases”) have been entered into for the purpose of entering into other cinemas.

The buyer will make a payment to the seller or the buyer will charge the seller a refund, depending on: (1) (i) whether the seller can renew the existing lease under the terms of the renewal of the agreement during the renewal period; (ii) whether the seller or the buyer can The agreed economic value of new leases and other leases. The refunds received by the buyer to the seller are up to RMB 380,000,000. Since no agreement has been signed on other leases, it is expected that the buyer will receive the highest amount of money from the seller of RMB 17,000,000.

In summary, the Vendor (ie, Orange Sky Golden Harvest) is required to procure Orange Sky China to renew the lease before the expiration of the lease of an existing cinema; and from the signing of the sale and purchase agreement to the end of December 2018, a number of new cinemas will be established. Rental agreement.

If the seller is unable to assist Orange Sky China in renewing the existing cinema lease during the renewal period, the buyer has the right to recover the transaction refund from the seller, up to a maximum of RMB 380 million.

Because of the relationship between the price adjustment mechanism and the “lease” clause, after the completion of the transaction to sell Orange China, Nanhai Holdings did not pay the price in one lump sum, but the balance of 300 million yuan was set up in Orange Sky and Nanhai in China. The joint bank account, after waiting for the agreed price adjustment and the renewal of the lease responsibility, will be paid to the orange sky from the joint bank account according to the actual amount. The payment period is from 6 months to 12 months after the completion of the transaction, i.e. In theory, the balance should be paid before the end of January to the end of July this year.

According to Orange’s notice, Orange Sky calculated the adjusted transaction balance to be 252 million RMB, and requested Nanhai Holdings to issue a written instructions to the joint bank account escrow agent to remit the money to the Orange Bank’s offshore bank account. However, Nanhai Holdings has still not issued a joint directive, so Orange Sky initiated a legal action to recover the balance.

Due to the limited information disclosed in the notice issued by Orange Sky, it is unclear why Nanhai Holdings refused to issue the joint directive because it disagreed with the balance of the transaction calculated by Orange Sky of RMB 252 million, or because Orange Sky China will inject Is there a lease dispute in Jiangyin Orange World in Orange Sky?

It seems that it is necessary to wait for Orange Sky or South China Sea to make further disclosures before we can know the inside story. At present, it is only Orange Sky that has unilaterally commenced litigation, and has not seen Nanhai Holdings’ response or any anti-claim action.