TVB admits bad investment in convertible bonds

Business | Stella Zhai 23 May 2019

Television Broadcasts (0511) chief executive Mark Lee Po-on said buying HK$650 million worth of convertible bonds of SMI Holdings (0198) was an investment mistake.

TVB found last week that SMI had remortgaged the collaterals under the convertible bonds to other companies last August without informing TVB, which may constitute a default.

Deloitte failed to discover the behavior last year when conducting due diligence on SMI. Neither did William Lo Wing-yan, independent non-executive director of TVB, as well as being executive director of SMI at the time find anything amiss.

Lo has since resigned from SMI due to a conflict of interests.

Lee said it is uncertain whether TVB will write down the value of those bonds until SMI discloses its financial report of last year, and it is possible for TVB to acquire the movie theaters under SMI. TVB will make the best choice according to the process of SMI's reorganization.

Lee said TVB has been buying bonds in recent years with the abundant cash generated from bond issuing, but the company has no further plans to invest in this kind of asset after the maturity of the bonds it has issued.

SMI has promised to find proper solutions, said Lee, but there is no detailed plan up to now. TVB shares closed yesterday at HK$14.50, gaining 2.4 percent.

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