SunMoon Food, the Singapore-listed produce marketer, has announced it has reached two key agreements that stand to clear the company of the multi-million dollar debt it owes to bondholders who helped to rescue the group from the brink of bankruptcy back in 2007.
Deputy chairman Gary Loh told Asiafruit that while SunMoon has been performing well under new management over the past few years, its “financials have been dragged down” by an outstanding debt owed to its bondholders
The principal owing on that convertible loan agreement signed on 21 March 2007 amounts to around S$24m while a further S$10m has accrued in interest.
But Loh said that SunMoon has now reached a settlement agreement with its bondholders to erase the outstanding loan. Not only have the bondholders agreed to waive the S$10m in interest owing on the loan, they have also accepted S$12m in cash as well as shares in SunMoon worth S$12m as payment for the S$24m principal.
The cash payment of S$12m comes through a new convertible loan agreement with Loh’s own private equity company First Alverstone.
“These new agreements mean that where SunMoon has been saddled with debts of around S$34m, it now only owes S$12m to First Alverstone,” Loh told Asiafruit. “This latter amount should be converted into shares in a debt-for-equity swop, which will effectively clear SunMoon of debt.”
Convincing the bondholders to waive the interest on the original loan and accept the S$12m equity-for-debt dimension of the deal was no easy feat, according to Loh. “It took us around six months to reach agreement on this deal, but their decision to accept it is an endorsement of what the management team has achieved here with the turnaround of SunMoon Food these past few years,” he said. “They `the bondholders` can see now that we’re running a profitable operation and we can move forward if this debt is erased.”
The loan and settlement agreements must now gain shareholder approval, a process that Loh expects to take around three months. The bondholders will have a 37 per cent shareholding in SunMoon once their debt-for-equity deal goes through, with Loh’s First Alverstone holding a similar shareholding. First Alverston will, however, have the option to buy half of their shares under the new convertible loan agreement, which would give Loh a 50 per cent shareholding.
“I see First Alverstone remaining a majority shareholder in SunMoon. We’re investing further into the company as we’re very confident about the future following the turnaround over recent years,” he told Asiafruit.
Brand-building
The SunMoon brand, which was built on high-quality Chinese Fuji apples and Asian pears sourced from the former FHTK plantation and packhouse operations, continues to command a strong following in key Asian markets such as Indonesia and Thailand. And SunMoon Food has taken legal action to protect the brand from counterfeiters in recent months, beginning with the Indonesian market.
“We initiated legal action and police raids last October on retail outlets and cold storage operations which were found to be carrying stock of counterfeit SunMoon-branded fruit,” said Ivan Chua, managing director of SunMoon Food Co’s fresh division. “All these cases were successfully concluded at the end of March. SunMoon and the offending parties have signed settlement agreements to include affidavits on admission of fault and source of counterfeit products from China.”
SunMoon has also aggressively pursued its global sourcing programme to expand the profile of the SunMoon brand beyond one that is synonymous with Chinese apples and pears, and to capitalise on its distribution network in the Asian region.
The diversification began in January when it shipped SunMoon-branded Chilean cherries into China, according to Chua. “We’re now working on a supply programme for Chilean Red Globe grapes and we have a sizeable programme for Chilean Royal Gala apples,” he detailed. “We’ve also begun sourcing Gala and Fuji apples from a Brazilian supplier.”
On the citrus deal, the company has agreed a programme to market Australia Honey Murcott mandarins from May and it has also lined up mandarin supplies from Argentina, including clementinas, clemenvillas and Murcotts.
“Our previous model was to supply high-quality Chinese apples into Asian markets and the rest of the world,” said Loh. “Our new model is to be a quality fruit company sourcing from around the world with a specific focus on Asian markets. Our traditional strengths lie in South East Asian markets such as Indonesia, so these will be our dominant markets but we’re looking across the whole of Asia.'
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