Gelonghui November 30丨Dacheng Biochemical Technology (00809.HK) announced that on November 30, 2023, Jilin Yuanheng and Jilin Liheng (as the subscribing party) signed a subscription agreement with the company (as the issuer). According to this, (i) Jilin Yuanheng conditionally agreed to use the full Jilin Yuanheng subscription amount (that is, RMB 250 million) to subscribe to the number of Yuanheng convertible preferred shares that can be issued to Jilin Yuanheng; and (ii) Jilin Liheng conditionally agreed to fully use the Jilin Henry subscription plan (i.e. RMB 250 million) (i.e. RMB 1.33 billion) Subscribe to Liheng convertible shares that can be issued to Jilin Liheng The number of preferred shares. The subscription price is HK$0.10 for convertible preferred shares per share subscription. The company will seek special authorization from independent shareholders at the special shareholders' meeting to allocate and issue converted shares after exercising the right to convert convertible preferred shares in the subscription matter.

The board recommended increasing the authorized share capital of the company from HK$2 billion to HK$6 billion. After the shareholders pass an ordinary resolution at the special shareholders' meeting, the increase in authorized share capital will take effect on the date of the special shareholders' meeting.

The company and directors have considered the viability of debt financing. However, given that the Group recorded financing costs of approximately HK$362.2 million in the six months ended June 30, 2023, accounting for about 54.7% of the Group's revenue during the same period, the directors believed that debt financing would incur further interest expenses and leverage for the Group. Due to rising market interest rates in the debt financing market and the Group's high leverage situation, the directors believe that the Group may not be able to obtain new bank financing on favorable or cost-effective terms, and given that the Group's net debt situation on June 30, 2023 is about HK$7,487.9 million, debt financing will place an additional financial burden on the Group. Therefore, equity financing through subscription matters is the most appropriate way to raise additional capital because (i) in the current volatile and uncertain global market conditions, this move is more practical, simple and direct; and (ii) since the company only has to pay priority distribution to subscribers of convertible preferred shares in the subscription matter at an annual interest rate of no more than 5%, the cost is low, and the financial burden it brings is minimal.