More than 70% of the convertible bonds issued by Shandong Longda Meishi Co.,Ltd. (SZ: 002726) remain unconverted, with the company unable to cover the principal and interest exceeding 800 million yuan due for redemption, leading it to commence an out-of-court restructuring process.
In a disclosure on the evening of July 7th, the company announced that as of July 6th, 2026, it still had 6.9686 million "Longda Convertible Bonds" that had not been converted into shares. This represents 73.35% of the total 9.5 million bonds issued. The company stated its current cash reserves are insufficient to cover the principal and interest payments for these bonds.
Prior to this payment crisis emerging, on July 3rd, the company announced the initiation of an out-of-court restructuring procedure. This move aims to resolve debt risks through market-oriented negotiations with creditors, shareholders, and potential investors, without first entering formal judicial bankruptcy proceedings. Concurrently, the company has launched a public recruitment process for restructuring investors.
Looking back, the company received regulatory approval and publicly issued 9.5 million convertible corporate bonds on July 13th, 2020. These bonds, named "Longda Convertible Bonds," had a face value of 100 yuan each, amounting to a total issuance of 950 million yuan. Trading of these bonds on the Shenzhen Stock Exchange commenced on August 7th, 2020. The conversion period for these bonds was set from January 18th, 2021, to July 12th, 2026.
Entering 2026, the company made multiple attempts to facilitate conversion by lowering the conversion price. On February 11th, 2026, the company's board approved a downward adjustment of the conversion price from 9.30 yuan per share to 4.20 yuan per share. Subsequently, on June 24th, 2026, the price was further adjusted down to 1.95 yuan per share.
Despite these efforts, by July 6th, 2026, 6.9686 million bonds remained unconverted, constituting 73.35% of the total issuance. As the maturity date approaches, this large unconverted base has transformed into significant redemption pressure. The "Longda Convertible Bonds" are set to mature on July 12th, 2026, with a redemption price of 115 yuan per bond (including tax and final interest). Based on the July 6th data, the funds required for principal and interest payments alone exceed 800 million yuan.
The company stated in its announcement that its current cash balance is expected to be insufficient to cover the upcoming bond payments, indicating a potential default risk. In terms of trading arrangements, the "Longda Convertible Bonds" will cease trading on July 8th, 2026. However, between the trading halt and the end of the conversion period (July 8th to July 10th, 2026), bondholders can still convert their bonds into company shares. The final conversion date and redemption record date are both set for July 10th, 2026.
Initiating the out-of-court restructuring on July 3rd, the company aims to negotiate arrangements for debt repayment, claim adjustments, and the infusion of new capital with relevant parties. The goal is to resolve debt risks and restore sustainable operations. The company explained that this preemptive step is intended to assess its restructuring value and feasibility, potentially paving the way for a pre-restructuring or formal restructuring process, thereby reducing costs and improving efficiency.
A crucial part of this process is the public recruitment and selection of restructuring investors. An announcement on the evening of July 3rd outlined two categories of investors: "industrial investors" and "financial investors." Industrial investors are those seeking to obtain control of the company, acquire significant assets, or engage in major strategic partnerships. Financial investors are those interested in acquiring shares through the restructuring without seeking control.
Regarding participation requirements, each industrial investor is required to post a security deposit of 30 million yuan, while each financial investor must post 10 million yuan. The deadline for applications is 5:30 PM on July 20th, 2026.
Nevertheless, the company has highlighted associated risks. The announcement notes that out-of-court restructuring is based on voluntary negotiation and lacks judicial enforcement power, creating significant uncertainty regarding whether agreements can be reached and successfully implemented. Should a court ultimately accept a formal restructuring application, the Shenzhen Stock Exchange would impose a delisting risk warning on the company's stock. If the restructuring fails, the company risks being declared bankrupt, which would lead to the termination of its stock listing.
Furthermore, the company cautioned that if it enters a formal restructuring process, the claims held by "Longda Convertible Bond" holders registered by July 10th, 2026, would be treated as restructuring claims for repayment. The specific repayment plan and timeline would depend on the finalized restructuring plan, remaining highly uncertain at this stage.
Alongside managing its own crisis, the company is also making institutional arrangements to address potential investor rights protection demands arising from a possible bond default. In a notice for the "First Bondholders' Meeting of 2026 for Longda Convertible Bonds" released on July 7th, the company proposed appointing Guolian Minsheng Securities Underwriting and Sponsorship Co., Ltd. as the trustee for all outstanding bondholders. This move is intended to facilitate a centralized and efficient process for bondholders to assert their rights.
To deliberate on this proposal, the company plans to convene the First Bondholders' Meeting of 2026 for "Longda Convertible Bonds" on July 22nd, 2026.