Silan profit into "exhaustion period" debt risks

June 7th Silan issue not more than 600 million yuan of corporate bonds has received Chinese Securities Regulatory Commission license No. [2011]835 approved. Company issued 600 million yuan of corporate bonds, the par value of 100 yuan, a total of 6 million, the issue price of 100 yuan each. The issuance of corporate bonds to be used for debt restructuring and to supplement the company's liquidity and repayment of loans. The shareholders' meeting shall authorize the board of directors to decide on the amount and proportion of the funds raised to repay the loans and supplement the working capital in accordance with the actual situation of the company's financial situation. For Silan, the risk of corporate bond financing will help avoid the issuance of new shares due to dispersed ownership and diluted earnings. But because of the duration of the bond, also external factors affected by the environment, the condition of capital market and the macroeconomic policies of the state and the production and operation of the company itself has certain uncertainty, changes in these factors will directly affect the company's solvency. From Silan 2010 earnings, the company pre mass production, project cost, huge capital investment, most of the capacity of the project has not been released. (see Table 1)

2010 micro capital expenditures

Table 1 data sources: Engineering LED industry institute according to engineering LED reporter was informed that the 8 sets of MOCVD equipment before the scheduled five Silan azure is not yet in place, no project can start production on time, the release of production capacity is also unknown. While Silan HD decoder chip development and Chengdu Silan a plant construction project construction also need a period of time, the short term will not bring profit to the company. Company a quarterly performance display, in addition to the IC company gross margin rose, discrete devices and light emitting diode gross margins have declined year on year. (see Table 2) table 2 data sources: Engineering LED Industry Institute finishing gross margin decline was mainly due to raw material prices, labor costs rise compared to the same period last year led to increased production costs and production line chip production capacity has not been further clear by the release of. Due to massive investment, a quarter of the company's cash inflow is greater than. (see Table 3)

2011 Silan first quarter cash flow statement

Table 3 data sources: Engineering LED Industry Institute and Silan, recent frequent equity pledge, insiders said, the company has a shortage of funds. The use of "Silan 600 million the issuance of corporate bonds, while alleviating liabilities, but also increase the new debt pressure. If the company can not generate new investment projects in the short term earnings, it will bear some debt pressure, will affect the allocation of shares. High tech LED reporter interviewed industry sources said.