Deals

ChinaCast Education Issues Non-convertible Debt

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ChinaCast Education Corp. (CAST) announced that it has raised $2.15 million in a Non-Convertible Debentures transaction. The securities accrue interest at a rate of 20%. A series of 2.15 million 60-Month Warrants with an exercise price of $0.40 per share (38.46% discount) was issued to the investors in this transaction, which was completed without an agent. Investors included Fir Tree Master Value Fund, AWM Investment Management, Ashford Capital Management and Park Financial Corp.

Deals
A123 Systems

A123 Gets $200M Convertible Jolt from Wanxiang Group

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Battery maker A123 Systems (AONE) agreed to receive a $200 million convertible debt infusion from China-based auto parts conglomerate Wanxiang Group Corp. It was the fifth PIPE offering from A123, which has raised $110 million in previous debt and equity placements. Complete conversion of debt and exercise of warrants would result in the issuance of 80% of the company’s stock to Wanxiang, according to a release. Wanxiang also extended a $75 million bridge loan. Waltham, Mass.-based A123 makes nanophosphate lithium iron phosphate batteries and electrical storage systems. The company has been struggling this year, beset by lagging earnings and a battery recall.

Markets

Chinese Issuers Remain Under Pressure

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Muddy Waters’ fraud allegations leveled at New Oriental Education & Technology Group (EDU) this week should remind investors that Chinese issuers listed in the U.S. still wear a bull’s eye, even if they happened to complete a conventional IPO. The Muddy Waters report, which claims that New Oriental Education is lying about its store growth, financial performance and structure, drove the company’s share price down 57% to $9.60 on Tuesday and Wednesday. Shares rebounded to $11.20 on Thursday. New Oriental Education raised $112.5 million in an IPO in 2006 and an additional $25 million in a secondary deal in 2007. Muddy Waters, a short seller, also cast doubt about the financial reporting veracity of other Chinese educators trading in the U.S., including TAL Education Group (XRS) and Ambow Education Holding (AMBO).

Markets

Privatizations Accelerating Among U.S.-listed China Issuers

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Shell shocked by short sales, intensified regulatory scrutiny, plunging valuations and an inability to raise money, beleaguered China-based companies that came to the U.S. public markets over the past five years are trying to get back to private life. A lot of investors would be happy to help them out the door as quickly as possible. Many issuers went public through reverse mergers and enjoyed hefty share price increases as they jumped from trading on over-the-counter markets to listing on U.S. exchanges. But short sellers alleging fraud at some of the companies in late 2010 and 2011 sparked an 18-month-long sell off of the entire group – even among Chinese issuers that completed conventional underwritten IPOs. For other investors, however, the going-private trend provides a deep well of arbitrage plays for the foreseeable future.